Deck 8: Service Facility Location

Question 1

Four hospitals located in one county are cooperating to establish a centralized bloodbank facility to serve them all. On an xy coordinate grid of the county, the hospitals are found at the following locations: H 1 = (5, 10), H 2 = (7, 6), H 3 = (4, 2), and H 4 = (16, 3). The expected number of deliveries per month from the blood bank to each hospital is estimated at 450, 1,200, 300, and 1,500, respectively. Using the cross-median approach, recommend a location for the blood bank that will minimize the total distance traveled.

Answer 1

The locations of healthcare facilities in a county are given below:
Step-1: Calculate the cross-media by adding the expected number of deliveries and dividing it by 2, as shown below:
Step-2: Identify the order of the four stores: If one has to move from east to west, west to east, north to south, and south to north.
East to west: d-c-b-a
West to east: a-b-c-d
North to south: b-c-d-a
South to north: a-d-c-b
Step-3: For each direction, add the demand values up until have reached or exceeded the cross-median value. In our problem, this value is 1725 (see step 1).
Step-4: Identify the business in which cross-median demand is reached or exceeded for each direction:
X-Axis Directions
• West to East = c
• East to west = c
Y-Axis Directions
• South to North = d
• North to South = d
Step-5: Identify the X coordinate for each of the X Axis directions,
West to East = c ( x = 7 , y = 6)
East to West = c ( x = 7 , y = 6)
Step-6: Identify the Y coordinate for each of the Y Axis directions,
South to North = d (x = 16, y = 3 )
North to South = d (x = 16, y = 3 ) Step-7: Choose the x coordinate from the step-5 and Y coordinate from the step-6,
.

Question 2

What are the characteristics of a service that would make communication a good substitute for transportation ?

Answer 2

The encounters faced by a service-based organization would be different from a product-based organization. The characteristics of service are likely to create different perceptions in the minds of customers in many aspects.
One of the examples that illustrate how features of service could create different perceptions in the minds of customers is, some characteristics of service would make communication better than transportation.
Characteristics of service that would make communication a good substitute for transportation is discussed as shown below:
• Intangibility:
Services are said to be intangible. They cannot be felt prior to purchase or consume a product. In this context, providing information regarding the service can reduces travel time and expenditure of the customers. For this to achieve, communicating the essence of service i.e. how the service is provided, where it is provided, etc. can be informed to customers through brochures, media etc.
For example, the sophisticated services provided in an old age home can be well communicated through media or direct marketing using brochures. This would help the people to know the services that will be rendered at old age homes prior visiting it.
• Inseparability:
Some of the services involves a quick response of the customers. Both providing the service and experiencing the service actions are inseparable. This feature involves a unique manner of combining service production and experiencing would take place at the same time and location. The provided may lead to either satisfaction or dissatisfaction of the customers physically, mentally, etc.
For example, service provided through customer care executives would involve serving the customers as per their query and the customers experiencing the service can be observed at the same time and location. Thus, customers need not travel to the company to pose their queries. They are served by the customer care executives instantaneously.
Thus, service based businesses are unique in their characteristics in developing their market strategy.

Question 3

Briefly state any shortcomings you may perceive in this model.

Answer 3

(a) Size may not be an adequate approximation of the attractiveness of a furniture store.  Other qualitative aspects such as perceived quality of the furniture, friendliness of the sales staff, and the customer's loyalty to an existing store may confound the size variable.
(b) At first glance, a long travel time to the store may be seen as a disincentive to visit a furniture store. To counteract such a disincentive, furniture stores can emulate automobile dealers who establish "motor miles" in many communities.  This strategy of locating all or most dealers in one area is effective in drawing many customers from great distances away.
(c) Other factors, most of that are not quantifiable, may also alter a customer's perception of the utility of the shopping center.  For example, consider the effect of an established firm's reputation or the lure of a new store.  The visibility of a store and the nature of adjoining stores or neighborhoods may also influence the store's ability to attract customers, but these factors are not easily measured.

Question 4

pizza delivery service has decided to open a branch near off-campus student housing. The project manager has identified five student apartment complexes in the northwest area of the city, the locations of which, on an xy coordinate grid in miles, are C 1 = (1, 2), C 2 = (2, 6), C 3 = (3, 3), C 4 = (4, 1), and C 5 = (5, 4). The expected demand is weighted as w 1 = 5, w 2 = 4, w 3 = 3, w 4 = 1, and w 5 = 5. Using the cross-median approach, recommend a location for the pizza branch that will minimize the total distance traveled.

Question 5

What are the benefits of using intermediaries in the service distribution channel ?

Question 6

A small city airport is served by four airlines. The terminal is rather spread out, with boarding areas located on an xy coordinate grid at A = (1, 4), B = (5, 5), C = (8, 3), and D = (8, 1). The number of flights per day, of approximately equal capacity, is A = 28, B = 22, C = 36, and D = 18. A new central baggage claim area is under construction. Using the cross-median approach, recommend a location for the new baggage claim area that will minimize the total weighted distance from the boarding areas.

Question 7

Go to http://www.pbinsight.com/welcome/mapinfo/ and find the definition of "location intelligence." What use can be made of geographic information?

Question 8

You have been asked to help locate a catering service in the central business district of a city. The locations of potential customers on an xy coordinate grid are P 1 = (4, 4), P 2 = (12, 4), P 3 = (2, 7), P 4 = (11, 11), and P 5 = (7, 14). The expected demand is weighted as w 1 = 4, w 2 = 3, w 3 = 2, w 4 = 4, and w 5 = 1. Using the cross-median approach, recommend a location for the catering service that will minimize the total weighted distance traveled to serve the customers.

Question 9

Revisit the copying service Huff analysis in Example 10.2. Recalculate the monthly customer expenditures and the market share for the proposed copying center at location B if the new store will be three times the capacity of the existing store at location A and the new demand weights from Exercise 10.1 above are used.

Question 10

Utilizing a ite Y w spreadsheet version of the Huff location model (with = 1.0), recommend a store size and location for AFI that will maximize expected net operating profit before taxes. Assuming that AFI does not wish to consider a store smaller than 10,000 square feet, assess the store sizes (based on increments of 5,000 square feet) up to the maximum allowable sales area for each potential site.

Question 11

locally owned department store samples two customers in each of five geographic areas to estimate consumer spending in its home appliances department. It is estimated that these customers are a good sample of the 10,000 customers the store serves. The number of customers in each area is C 1 = 1,500, C 2 = 2,500, C 3 = 1,000, C 4 = 3,000, and C 5 = 2,000. It is found that the two consumers have the following budgets in dollars for home appliances per year: B 11 = 100, B 12 = 150; B 21 = 75, B 22 = 100; B 31 = 125, B 32 = 125; B 41= 100, B 42 = 120; and B 51 = 120, B 52 = 125.
a. Using the Huff retail location model, estimate annual home appliance sales for the store.
b. Bull's-Eye, a chain department store, opens a branch in a shopping complex nearby. The Bull's-Eye branch is three times larger than the locally owned store. The travel times in minutes from the five areas to the two stores ( j = 1 for the locally owned store, j = 2 for Bull's-Eye) are T 11 = 20, T 12 = 15; T 21 = 35, T 22 = 20; T 31 = 30, T 32 = 25; T 41 = 20, T 42 = 25; and T 51 = 25, T 52 = 25. Use the Huff retail location model to estimate the annual consumer expenditures in the home appliance section of each store assuming that

Question 12

Revisit the copying service in Example 10.1 and assume that over the years, the monthly demand from the four customers has increased to the following weights: w 1 =7, w 2 = 9, w 3 = 5, w 4 = 7. If we previously located the copying service at point A in Figure 10.6, should we now consider a relocation?

Question 13

A community is currently being served by a single self-serve gas station with six pumps. A competitor is opening a new facility with 12 pumps across town. Table 10.12 shows the travel times in minutes from the four different areas in the community to the sites and the number of customers in each area.
a. Using the Huff retail location model and assuming that
, calculate the probability of a customer traveling from each area to each site.
b. Estimate the proportion of the existing market lost to the new competitor.

Question 14

Pick a particular service, and identify shortcomings of its site selection.

Question 15

Recall the rural medical clinics in Example 10.3 and suppose that each community were required to be 25 miles at most from the nearest clinic. How many clinics would be needed, and what would their locations be? Give all possible location solutions.

Question 16

What is the expected annual net operating profit before taxes and market share for the outlet you have recommended ? Defend your recommendation.

Question 17

A bank is planning to serve the rural communities shown in Figure 10.8 with automated teller machines (ATMs). The travel time in minutes between communities in the service area is shown on the network in Figure 10.8. The bank is interested in determining the number and location of ATMs necessary to serve the communities so that a machine will be within 20 minutes' travel time of any community.

Question 18

A temporary-help agency wants to open an office in a suburban section of a large city. It has identified five large corporate offices as potential customers. The locations of these offices in miles on an xy coordinate grid for the area are c 1 = (4, 4), c 2 = (4, 11), c 3 = (7, 2), c 4 = (11, 11), and c 5 _ (14, 7). The expected demand for temporary help from these customers is weighted as w 1 = 3, w 2 = 2, w 3 = 2, w 4 = 4, and w 5 = 1. The agency reimburses employees for travel expenses incurred by their assignments; therefore, recommend a location (i.e., xy coordinates) for the agency that will minimize the total weighted metropolitan distance for job-related travel.

Question 19

The volunteer fire department serving the communities in Figure 10.8 has just purchased two used fire engines auctioned off by a nearby city.
a. Select all possible pairs of communities in which the fire engines could be located to ensure that all communities can be reached in 30 minutes or less.
b. What additional consideration could be used to make the final site selection from the community pairs found in part a?

Question 20

How would you proceed to estimate empirically the parameter " " in the Huff retail location model for a branch bank ?

Question 21

Try two other values of (e.g., 0.5 and 5.0) to measure the sensitivity of customer travel propensity on your recommended location.