Author of the Book
Facility Location Problem
The facility location decision is a critical issue in strategic supply chain network design. Based on my literature search, solution methods can be classified as below,
- Analysis of demand/supply data: the company needs to gather the data, then determine if they want to have a facility located near the source of supply, near demand points, or something in between. One of the most extensive data sources is Commodity Flow Survey data which provides transportation volume by origin/destination/mode of transportation/type of commodities and so on. The problem is that the data is so huge (500,000 rows in an excel file) that it's not easy to analyze.
- Criteria-based decision-making: the company develops the list of selection criteria, assigns a weight to each criterion, and selects a final location based on the total score. This seems to be a very straightforward method, but the selection criteria can be very complicated. There are more than 60 selection criteria, more than overwhelming.
- Facility Location Algorithm: this method uses a certain math calculation to determine the best facility location. This is the least practical solution because there are too many algorithms to choose from.
According to Dr. Sheffi, "Such models are typically incapable of finding real business optimal solutions because of both their mathematical shortcomings and the inherent forecasting challenges".
The Story of Logistics Clusters
"Why do certain locations are more attractive than others?", Dr. Sheffi explains in this book why Logistics Clusters can thrive and grow. Lesson learned from Logistics Clusters he visited along with extensive data collection from experts around the world is summarized below,
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| Location Strategy |
Chapter 2: Dr. Sheffi describes the characteristics of the successful Logistics Clusters, namely Port of Rotterdam, Singapore, Panama Canal, and Memphis. At the end of this chapter, he also analyzes how various natural factors play an important role in the success and failure of a certain location.
Chapter 3: Florence, which is one type of cluster is examined. Dr. Sheffi suggests that there are 2 types of relationships and there are ways to improve the relationship between companies who share the same location.
Chapter 4: after establishing relationships with co-located companies, collaboration can result in more efficient operations and competitive advantage. A collaboration between SC Johnson & Son Inc and The Energizer Battery Company is a very good example.
Chapter 5: Dr. Sheffield demonstrates how companies can add value to products and customer services. Some international business ideas for non-logistics businesses are also presented here.
The difference between a traditional facility location problem and the lesson learned from the story of Logistics Clusters is that real business value is more important than the location with the lowest cost.
Conclusion
This book is quite different from books about industrial clusters. Chapter 1-5 of this book is very practical and the concept can be applied to the actual business situation. I found that Chapters 6-10 will be very useful if you are a policy-makers. If you are an undergraduate student, Chapter 4 will be interesting for you because some logistics theories are covered in an easy-to-understand manner. In short, there is something for everyone and I strongly believe that readers will enjoy this book the same as I do.
Books We Recommend
- Supply Chain Books
- Purchasing Book
- Operations Management Book
- Inventory Control Book
- Lean Books
Last review and update: July 5, 2022