The location of a facility directly affects the logistics of a company. This affects the production system, the volume of production which will be manufactured and how it will be distributed. The location of an installation must be a strategic decision (long-term).

A new installation requires a major investment and also determines the competitiveness of the company (product costs, poor planning, operator costs, etc.). The location affects the operations department (transport), personnel, and finance, among others.


Source: Reproduced from <;. Accessed: 03/01/2016.

If a company has more distribution points, transport costs are lower but the cost of the facilities is higher. Therefore, it seeks to reach a point of equilibrium. When we choose the location we must take into account factors such as transport, labor supply, space for expansion, living conditions, among other factors.

Some important exact and heuristic (quantitative) methods used to select a location are: center of gravity method, factor – rating analysis, break – even analysis, and set covering models . We can also use other mathematical programming methods. To learn more about these methods, you can see the links below.

Center of gravity method
Factor – rating analysis
Break-Even analysis (pp. 81-84)

Set covering models
Mathematical programming methods

Aurea Jordán


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