Centre for Excellence in Operations (CEO)

Facility Location Optimization

Detailed report

Final presentation

A company in Edmonton approached our team in search of a solution to a distribution problem. This company currently operates four production facilities; one in Leduc, one in Strathcona and two in west-Edmonton. This client, however, feels that the current layout is inefficient and is seeking a recommendation as to how they can more optimally locate their production facilities in order to minimize delivery costs. They are content with the Strathcona plant and one of the west-Edmonton facilities, but are looking to potentially close the Leduc facility, close the other west-Edmonton plant, and open a new facility in a location that will minimize delivery times based on demand throughout the region.

To handle this issue, our team created a model capable of calculating the total delivery costs associated with closing existing plants and opening new facilities in various ?candidate locations? (based on restrictions provided by the client) throughout Edmonton. Our process in constructing this model involved segmenting our clients demand geographically, calculating travel distances between each demand region and each current and candidate plant location, converting the calculated travel distances into travel time, applying our client?s costs to the associated travel times, and lastly selecting the optimal facility layout that successfully minimized these total costs.

In addition to our relocation analysis, the client was also provided with a graphical user interface to easily manipulate the model. This interface will allow the client to ?turn on or off? any of their existing facilities as well as any potential plant within the candidate locations. As different plant allocations are selected by the user, they are shown the total delivery costs and plant utilization rates associated with that particular facility mix. Further to that, as different plant locations are selected, a dynamic colour coded map of Edmonton and surrounding areas shows the user which plant is servicing which demand region. This interface equips the client with a powerful decision making tool, allowing them to easily distinguish which facility should provide product to which region, as demand may shift in the coming years.