Mr.

The Kepner¡¦s case study

A location has to be found for establishing Kepner Regional Health Centre. The deciding group consist of 3 commissioners, having three different views, a suitable location has to be chosen for the given case.

The location:

Kepner County covers a very large area that is approximately 100 miles by 100 miles and it is located in a sparsely populated region of a western state of the USA. The current availability of health care in the county is extremely limited. This is due largely to the fact that the entire county only has about 6,000 residents. This population is spread over 10 primary communities in the county: Aurand (L1), Harman (L2), Clelland (L3), Cornell (L4), Maxham (L5), Gunn (L6), Eason (L7), Jenks (L8), Brownell (L9) and Linda (L10).

Location in coordinate grids:


Literature review:

The efficient and effective movement of goods from raw material sites to processing facilities, component fabrication plants, finished goods assembly plants, distribution centers, retailers and customers is critical in today.s competitive environment. Approximately 10% of the gross domestic product is devoted to supply-related activities (Simchi-Levi, Kaminsky, and Simchi-Levi, 2003, p. 5). Within individual industries, the percentage of the cost of a finished delivered item to the final consumer can easily exceed this value. Supply chain management entails not only the movement of goods but also decisions about (1) where to produce, what to produce, and how much to produce at each site, (2) what quantity of goods to hold in inventory at each stage of the process, (3) how to share information among parties in the process and finally, (4) where to locate plants and distribution centers.

Location decisions may be the most critical and most difficult of the decisions needed to realize an efficient supply chain. Transportation and inventory decisions can often be changed on relatively short notice in response to changes in the availability of raw materials, labor costs, component prices, transportation costs, inventory holding costs, exchange rates and tax codes. Information sharing decisions are also relatively flexible and can be altered in response to changes in corporate strategies and alliances. Thus, transportation, inventory, and information sharing decisions can be readily re-optimized in response to changes in the underlying conditions of the supply chain. Decisions about production quantities and locations are, perhaps, less flexible, as many of the costs of production may be fixed in the short term. Labor costs, for example, are often dictated by relatively long-term contracts. Also, plant capacities must often be taken as fixed in the short-term. Nevertheless, production quantities can often be altered in the intermediate term in response to changes in material costs and market demands.

Facility location decisions, on the other hand, are often fixed and difficult to change even in the intermediate term. The location of a multibillion-dollar automobile assembly plant cannot be changed as a result of changes in customer demands, transportation costs, or component prices. Modern distribution centers with millions of dollars of material handling equipment are also difficult, if not impossible, to relocate except in the long term. Inefficient locations for production and assembly plants as well as distribution centers will result in excess costs being incurred throughout the lifetime of the facilities, no matter how well the production plans, transportation options, inventory management, and information sharing decisions are optimized in response to changing conditions.

In Supply Chain Design, therefore, choosing location plays a vital role.

Krajewski & Ritzmen in their Operation Management text book (2005,7 ed, Prentice hall) Propose the following points should be considered in locating:

ƒÞBesides distributing outputs to customers by transporting them, if there is a facilitating good, we can also locate where our customers can easily obtain them.
ƒÞAdvances in information and telecommunications technology have allowed some pure service organizations (i.e., those without a facilitating good) to reach their recipients through phone, cable, the Internet, or microwave links.

They have also explained there is a trade ¡V offs between them:

ƒÞProcessing Natural Resources
„RLarge loss in size or weight during processing
„RHigh economies of scale exist
„RRaw material is perishable
ƒÞImmobile Outputs
There are many methods to chose location, but centre of gravity is sutiable method, as we presume:
Several models have been applied at regional level for health care facility planning relating the efficiency of the system and the allocation of resources. The majority of these models consider geographic access (generally measured in terms of traveling cost) as the most significant factor in the utilization of health services. In a broad outline their analysis concerns the minimization of distance or time that patients have to travel from their residence to the medical facilities.

Method:1 Flow chart methodology

Reference: Article: Applications of GIS in Healthcare Planning of Lao PDR.
Kulapamote Prathumchai, Lal Samarakoon Asian Center for Research on Remote Sensing (ACRoRS), Asian Institute of Technology,

Method2: Centre of Gravity

The center of gravity is a geographical center of set of locations weighted by their "loads" (such as populations or frequency of shipments). It's derived by multiplying each location's load by both its x coordinate and its y coordinate, summing the populations, the weighted X's, and the weighted Y's, and dividing first the sum of weighted x's, then the sum of weighted y's, by the sum of populations.

Calculation of centre of gravity for Kepner county:

Location Population (l) X Y l*x l*y
L1 1,000 15 90 15000 90000
L2 300 35 85 10500 25500
L3 700 30 75 21000 52500
L4 400 20 50 8000 20000
L5 200 40 10 8000 2000
L6 1,300 25 60 32500 78000
L7 600 75 80 45000 48000
L8 400 80 40 32000 16000
L9 600 90 5 54000 3000
L10 500 95 85 47500 42500
Total 6,000 273500 377500

The formula for Centre of gravity ( From Krajewski & Ritzman)


Using the formula for the given data, it is obtained:
The location of Centre of Gravity:

X 45.58333
Y 62.91667



Advantages:

1. It is scientific, we can make the entire population to accept.
2. It is not located in any existing population, so as others will not have objections
3. The distance traveled by all population, is optimum and minimum.

Expected disadvantages and ways to overcome:
1. The new location may not have road facility. It has to be established as a part of the project, to implement it effectively, so the establishment of the roads is to be taken into account of the project.
2. The new location may have some natural barriers like mountain/river. In that case we can choose a place around the proposed location.

Conclusions:

Facility locations decisions are critical to the efficient and effective operation of a supply chain. Poorly placed plants and warehouses can result in excessive costs and degraded service no matter how well inventory policies, transportation plans, and information sharing policies are revised, updated, and optimized.
Therefore, centre of gravity model approach is found suitable and in the given situation Kepner¡¦s Regional Health Centre is proposed to establish at the coordinates: 45.58333, 62.91667

Reference:
¡P Krajewski, L and L Ritzman (2005), Operations Management: Strategy and Analysis, Addison Wesley & Prentice Hall
¡P Simchi-Levi, D., P. Kaminsky, and E. Simchi-Levi, 2003, Designing and Managing the Supply Chain: Concepts Strategies and Case Studies, Second Edition, McGraw-Hill, Irwin, Boston, MA.
¡P Meredith, J and S Schafer (2002) Operations Management for MBAs, (2nd edition), John Wiley & Sons, New York
¡P Hill, T (2000), Operations Management: Strategic Context and Managerial Analysis, Macmillan, London
¡P Waters, D (2002), Operations Management: Producing Goods and Services, Prentice Hall.

Mr. 7.7 of 10 on the basis of 2766 Review.