{"id":9312,"date":"2011-10-10T05:35:53","date_gmt":"2011-10-10T11:35:53","guid":{"rendered":"https:\/\/staging.opexlearning.com\/resources\/?p=9312"},"modified":"2022-04-08T14:12:14","modified_gmt":"2022-04-08T19:12:14","slug":"distribution-center-location-optimizing-your-logistics-network","status":"publish","type":"post","link":"https:\/\/staging.opexlearning.com\/resources\/distribution-center-location-optimizing-your-logistics-network\/9312\/","title":{"rendered":"Center of Gravity Method in Distribution Center Location"},"content":{"rendered":"<div class=\"a296a24fa2fc69ef5487857f02f111e8\" data-index=\"9\" style=\"float: none; margin:10px 0 10px 0; text-align:center;\">\n<script async src=\"\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\r\n<!-- Single Post readerboard -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:inline-block;width:728px;height:90px\"\r\n     data-ad-client=\"ca-pub-8207522353004717\"\r\n     data-ad-slot=\"1144967431\"><\/ins>\r\n<script>\r\n(adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script>\n<\/div>\n<p>One has to ask <a title=\"warehousing strategy question to ask\" href=\"https:\/\/staging.opexlearning.com\/resources\/what-where-and-how-of-warehouse-management\/9828\/\">What, Where, and How when it comes to your warehousing strategy<\/a>. Or another hot area to consider in build-to-order fulfillment is the explosion of <a title=\"3d printing industry and the companies to watch\" href=\"https:\/\/staging.opexlearning.com\/resources\/3d-printing-7-companies-to-watch\/10682\/\">3D Printing Companies<\/a>.<\/p>\n<p>There are at least 3 critical items that allow you to reduce costs and increase service level in warehousing:<\/p>\n<ol>\n<li>Tight and Necessary <a title=\"what are your warehousing processes that are value add\" href=\"https:\/\/staging.opexlearning.com\/resources\/warehouse-management-processes\/7300\/\">Warehousing Processes<\/a><\/li>\n<li>What <a title=\"warehouse metrics help you measure your warehouse processes\" href=\"https:\/\/staging.opexlearning.com\/resources\/warehouse-management-metrics\/7310\/\">Warehouse Metrics<\/a> do you have in place to help you determine if your processes are going well or not.<\/li>\n<li>You <a title=\"where to locate your warehouse\" href=\"https:\/\/staging.opexlearning.com\/resources\/distribution-center-location-optimizing-your-logistics-network\/9312\/\">warehouse location<\/a> is optimal in the first place to meet service level commitments.<\/li>\n<li>These together will help you <a title=\"how to reduce costs in your warehouse\" href=\"https:\/\/staging.opexlearning.com\/resources\/warehouse-reduce-costs-increase-service-level\/10028\/\">reduce costs in your warehouse<\/a>.<\/li>\n<\/ol>\n<p>Where to build a distribution center, fulfillment center, or warehouse is a strategic question. The answer to &#8220;where&#8221; are drivers to costs and the customer experience. Where to build your next warehouse is an incredibly important question to answer. After you answer the &#8220;where&#8221; question, then we need to discuss what <a title=\"processes inside of a warehouse\" href=\"https:\/\/staging.opexlearning.com\/resources\/warehouse-management-processes\/7300\/\">warehouse processes<\/a> and <a title=\"metrics that are in warehousing\" href=\"https:\/\/staging.opexlearning.com\/resources\/warehouse-management-metrics\/7310\/\">warehouse metrics<\/a> ought you establish.<\/p>\n<p>There are, of course, many factors to consider:<\/p>\n<ul>\n<li>What is your expected inventory profile?<\/li>\n<li>What is your geographic distribution strategy?<\/li>\n<li>State and Municipalities incentives? State and Local Government Incentives?<\/li>\n<li>Proximity to the Logistics Carrier (such as UPS World Hub or Ground Transport)<\/li>\n<li>The pool of local talent available in the area.<\/li>\n<li>Inbound and Outbound transportation costs.<\/li>\n<li>Access to interstate highway systems or inbound sea import locations.<\/li>\n<li>Crime rate, Housing, Educational Facilities<\/li>\n<li>State Taxes, Nexus<\/li>\n<li>Building construction codes and zoning restrictions<\/li>\n<\/ul>\n<p>The above are important criteria and should be considered. A popular technique for selecting a new facility location based on different weighted criteria is the <a href=\"https:\/\/staging.opexlearning.com\/resources\/prioritization-matrix\/4127\/\">prioritization matrix<\/a>.<\/p>\n<p>But, to answer the question of &#8220;where&#8221;, also requires a more quantitative approach that should be used in concert with the above considerations. One common approach to identifying where to build the next single fulfillment center location is a method called the Center of Gravity Method.<\/p>\n<h2>Center of Gravity Method<\/h2>\n<p>The Center of Gravity Method is an approach that seeks to compute geographic coordinates for a potential single new facility that will minimize costs. It&#8217;s an approach where the main inputs that it considers are the following:<\/p>\n<ul>\n<li>Markets<\/li>\n<li>Volume of goods shipped<\/li>\n<li>Shipping costs<\/li>\n<\/ul>\n<p>This method is beneficial because it&#8217;s (1) Simple to compute, (2)\u00a0Considers existing facilities, (3) and\u00a0Minimizes costs.<\/p>\n<h2>How To Use Center of Gravity Method<\/h2>\n<h3>Step 1:<\/h3>\n<ul>\n<li>Place existing warehouse, fulfillment center, and distribution center locations in a coordinate grid.<\/li>\n<li>Place the grid on an ordinary map.<\/li>\n<li>The relative distances must be noted.<\/li>\n<\/ul>\n<h3>Step 2:<\/h3>\n<p>Then, using the equations below,<\/p>\n<ul>\n<li>Cx= \u2211 dix Vi\/ \u2211 Vi<\/li>\n<li>Cy= \u2211 diy Vi\/ \u2211 Vi<\/li>\n<\/ul>\n<p>We calculate the X and Y coordinates using these equations where Cx is the X (horizontal axis) coordinate for the new facility. Cy is the Y (vertical axis) coordinate for the new facility, dix is the X coordinate of the existing location, diy is the Y coordinate of the existing location, and Vi is the volume of goods moved to or from the ith location.<\/p>\n<h3>Step 3:<\/h3>\n<p>Once you have obtained the X and Y coordinates place that location on the map.<\/p>\n<p>But, it doesn&#8217;t end there. As I mention earlier, there are other factors to consider. What this method allows is a point of departure &#8211; or, literally, a starting point of where (from the perspective of longitude and latitude) you options are for where to grow your fulfillment or logistics network.<\/p>\n<h2>Center of Gravity Example<\/h2>\n<p>Let&#8217;s suppose your company wants to expand its logistics network and locate a facility within a network of three existing facilities. Given the following assumptions below, what are the coordinates for the new potential location?<\/p>\n<p>Let&#8217;s assume the following:<\/p>\n<ul>\n<li>Warehouse 1 has a daily outbound goods volume of 2,500 units<\/li>\n<li>Warehouse 2 has a daily outbound goods volume of 1,300 units<\/li>\n<li>Warehouse 3 has a daily outbound goods volume of 5,000 units<\/li>\n<\/ul>\n<p>And the current coordinates of the existing facilities:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-33046 size-full\" title=\"center-of-gravity-method-fulfillment-center\" src=\"https:\/\/staging.opexlearning.com\/resources\/wp-content\/uploads\/2011\/10\/center-of-gravity-method-fulfillment-center-2022.jpg\" alt=\"\" width=\"637\" height=\"447\" srcset=\"https:\/\/staging.opexlearning.com\/resources\/wp-content\/uploads\/2011\/10\/center-of-gravity-method-fulfillment-center-2022.jpg 637w, https:\/\/staging.opexlearning.com\/resources\/wp-content\/uploads\/2011\/10\/center-of-gravity-method-fulfillment-center-2022-300x211.jpg 300w\" sizes=\"(max-width: 637px) 100vw, 637px\" \/><\/p>\n<p>Given the assumptions and grid coordinates above, we get the following:<\/p>\n<ul>\n<li>d1x= 200<\/li>\n<li>d2x= 300<\/li>\n<li>d3x= 100<\/li>\n<li>d1y= 50<\/li>\n<li>d2y= 100<\/li>\n<li>d3y= 150<\/li>\n<\/ul>\n<p>And,<\/p>\n<ul>\n<li>V1= 2,500<\/li>\n<li>V2= 1,300<\/li>\n<li>V3= 5,000<\/li>\n<\/ul>\n<p>Which gives us,<\/p>\n<ul>\n<li>Cx= (200 x 2,500) + (300 x 1,300) + (100 x 5,000) \/ (2,500 + 1,300 + 5,000) = 158<\/li>\n<li>Cy= (50 x 2,500) + (100 x 1,300) + (150 x 5,000) \/ (2,500 + 1,300 + 5,000) = 114<\/li>\n<\/ul>\n<p>If we were to plot the new suggested warehouse coordinates on the grid, we would get:<\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-33045 size-full\" title=\"center-of-gravity-method-fulfillment-center-logistics-network\" src=\"https:\/\/staging.opexlearning.com\/resources\/wp-content\/uploads\/2011\/10\/center-of-gravity-method-fulfillment-center-logistics-network-2022.jpg\" alt=\"\" width=\"625\" height=\"441\" srcset=\"https:\/\/staging.opexlearning.com\/resources\/wp-content\/uploads\/2011\/10\/center-of-gravity-method-fulfillment-center-logistics-network-2022.jpg 625w, https:\/\/staging.opexlearning.com\/resources\/wp-content\/uploads\/2011\/10\/center-of-gravity-method-fulfillment-center-logistics-network-2022-300x212.jpg 300w\" sizes=\"(max-width: 625px) 100vw, 625px\" \/><\/p>\n<p>Of course the discussion doesn&#8217;t end here. Once a coordinate or several are identified given the current logistics network context, then other factors must be considered. This is just the beginning &#8211; a point of departure.<\/p>\n<!--CusAds0-->\n<div style=\"font-size: 0px; height: 0px; line-height: 0px; margin: 0; padding: 0; clear: both;\"><\/div>","protected":false},"excerpt":{"rendered":"<p>One has to ask What, Where, and How when it comes to your warehousing strategy. Or another hot area to consider in build-to-order fulfillment is the explosion of 3D Printing Companies. There are at least 3 critical items that allow you to reduce costs and increase service level in warehousing: Tight and Necessary Warehousing Processes [&hellip;]<\/p>\n","protected":false},"author":12327,"featured_media":9315,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[508,657],"tags":[2837,2835,2839,2836,2838,2840],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.0 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Center of Gravity Method in Distribution Center Location<\/title>\n<meta name=\"description\" content=\"Center of Gravity Method in Distribution Center Location - 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