Lets say you have 3 project or construction sites at Ohio, Michigan, and Illinois.
You will need to find a warehouse willing to support these projects at once.
Where in the US would be the optimal warehouse location considering materials are imported from any US port?
Academically many supply chain managers recommend center of gravity method. However fair warning you need to also factor in:
- Does this location have enough labor?
- Does it have a major highway?
Many people failed due to lack of labor to support the warehouse.
Center of Gravity is for calculating distances
A company operates three project sites across different states in the U.S. and needs to determine the best location for a new warehouse that minimizes transportation costs. The company imports materials through various ports and distributes them to these project sites.
Project Site 1: Located at (X₁, Y₁) with an annual shipment volume of Q₁
Project Site 2: Located at (X₂, Y₂) with an annual shipment volume of Q₂
Project Site 3: Located at (X₃, Y₃) with an annual shipment volume of Q₃
Each project site has different shipment volumes, which need to be considered when selecting the warehouse location. The objective is to find a central warehouse location that minimizes the total transportation distance, weighted by shipment volume.
X-coordinate of the optimal location:
X = (Sum of (X coordinate * Shipment Volume)) / (Sum of Shipment Volume)
Y-coordinate of the optimal location:
Y = (Sum of (Y coordinate * Shipment Volume)) / (Sum of Shipment Volume)
Now using realistic options
Realistically that coordinate you calculate warehouse won’t exist. However find the closet warehouse and calculate the distance to coordinates you created.
In advance situation companies utilize the capacitated facility location problem (CFLP) is an optimization model in supply chain management that selects the best sites based on geographic coordinates, capacity, and production constraints. Additional constraints, such as proximity to a port terminal, can be included to refine the solution.
https://scipbook.readthedocs.io/en/latest/flp.html
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