Quiz 8: Service Facility Location

Business

Huff location model was developed by DL Huff for predicting the benefits that customer can get for a specific store size and its location. This model uses gravity model to find the attractiveness of a facility. Determine the store size and location for AFI using Huff location model as shown below: The maximum size limits for different AFI sites are given below: img Using the above table and minimum travel time data for various sites calculate the attractiveness. Attractiveness to facility img for consumer img is determined using given formula: img …… (1) Here, img Here, the value of img is 1. The attractiveness for each site is determined using formula (1) in spreadsheet as shown below: Figure 1: Screenshot of formulas used in excel spreadsheet img Figure 2: Screenshot of results obtained img Determine the probability of a site using given formula: img …… (2) Here, img is the probability The probability for each site is determined using formula (2) in spreadsheet as shown below: Figure 3: Screenshot of formulas used in excel spreadsheet img Figure 4: Screenshot of results obtained img Determine the total annual expenditure of a product using given formula: img …… (3) Here, img = number of customers at area img img = Average annual budget The total annual expenditure for each site is determined using formula (3) in spreadsheet as shown below: Figure 5: Screenshot of formulas used in excel spreadsheet img Figure 6: Screenshot of results obtained img Calculate the market share using given formula: img …… (4) Here, img = number of customers at area img img = Average annual budget The probability for each site is determined using formula (4) in spreadsheet as shown below: Figure 7: Screenshot of formulas used in excel spreadsheet img Figure 8: Screenshot of results obtained img Hence, it is seen that market share of Site Y is the highest viz. 45.68%. Therefore, AFI should locate its new store at Site Y. The market share and total annual expenditure of the site are 45.68% and $756,825 , respectively.

Copying Service Revisited img img No need to relocate because optimal location is line segment (2, 2-3), which includes location A at (2,2).

Many times the extent to which a poor decision regarding the location of a service facility affects the business is not apparent until a competitor locates on a better site.  The location of Kemper Arena in Kansas City is a case in point.  The arena is located in the old stockyard district near downtown and it is no longer a safe area.  It is not served directly by any freeway or interstate system and most people travel to the arena through the downtown area.  Therefore, events that are scheduled for early evening exacerbate the usual downtown evening rush hour traffic.  An additional problem occurs when the event ends and people must exit the many small parking lots. Although no causality has been proved, it is often suggested that the poor attendance at games for the professional sports teams based at Kemper results from the stadium's location.  In fact, attendance is a serious problem that has prompted two teams (the Kansas City Comets and the Kansas City Kings) to leave Kansas City. The Harry S. Truman Sports Complex offers a striking contrast to Kemper Arena.  The Complex stadiums, which house the Kansas City Royals and the Kansas City Chiefs, are located in a suburban area next to a major freeway and two large multilane city streets.  These thoroughfares expedite traffic into and out of the stadiums.  Most people who live in metropolitan Kansas City can reach the Complex faster than they can reach Kemper.  This is an excellent example of the situation where the shortest distance is not always the quickest route. The location of the Complex offers advantages other than the savings in travel time for patrons.  Its location is safer than the Kemper area, it offers many restaurants and bars for pre-game and post-game dining, and has three hotels within walking distance so out-of-town people have a convenient place to stay when they come to cheer their visiting teams.  One disadvantage that Kemper and the Complex share is a lack of good public transportation. A final irony may be noted:  Kemper was invited to be a part of the Complex... but declined!