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Thursday 24th May 2018
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Author notes: Bill Brockbank has been involved in logistics across the Northern hemisphere for 30 years. An engineer by accident and mathematician by instinct, he has developed and published new methods for forecasting slow movers (Institute of Business Forecasting conference, Chicago), safety stock (Cranfield Supply Chain Knowledge Conference) and retail shelf fixturing (Cranfield) Concerned at the poor communication between logisticians and their peers and 'customers' he founded Supply Chain Tools Ltd to encapsulate and animate supply chain principles in engaging, interactive and graphic ways.

Originally published in Distribution Magazine

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Warehouse & DC Location - Centre of Gravity is deeply flawed

As companies look to a European Distribution Strategy, we argue a fresh approach to the warehouse location method.

A standard approach to warehouse location is to start with the centre of gravity of demand, and to model various options at or near the centre. The centre of gravity (CoG) method is technically unsound, but the error involved in using it in our densely populated island is generally small. As companies look increasingly to distribution strategies for Europe, the potential error becomes quite serious.

The fallacy of the CoG method is easily demonstrated. The simplest case is a warehouse with two demand points. If the demands are for 100 truck loads in Edinburgh and the same number in London, then the CoG method suggests a site halfway between the two, near Leeds. If demand in Edinburgh increases by 10 truck loads, CoG shifts the 'ideal' location north a little, to Wetherby.

In the first case the answer is incomplete, in the second it's plain wrong.

Where the demand is equally balanced, the truck has to complete 100 round trips starting from base, running to Edinburgh, back to base, on to London and back to base again. Any base location along the route will incur exactly the same mileage. The warehouse location can be chosen freely anywhere along the 450 mile corridor. Grants, rents, rates and labour costs and quality dominate the decision, not CoG.

The second case is even more serious. Delivery of the first 200 truck loads 'cancels out' - an important concept which we will return to in a moment. Providing we stick to the line of the M1/A1, the ideal location is arrived at by considering the first 200 truck loads as if they don't exist. Faced with the remaining 10 truckloads, there is only one possible location - as near to Edinburgh as land and labour considerations will allow.

Technically, these last 10 loads are the 'un-paired, uncancelled' ones. Transporting them from Wetherby to Edinburgh incurs 10 round trips at 450 miles a time, a 4,500 truck mile penalty over the optimum location.

The idea that equal demands at opposite ends of a delivery area cancel out, rather than simply balance out, is a powerful one. By progressively cancelling out equal demands from opposite extremities of the country, we can draw 'contour lines' of equal warehousing potential. Contouring is not only highly accurate, it also encourages the input of straight commercial logic. In these case studies, the contour approach led to sites which would never have been considered using CoG. After all, what location planner faced with a computer model giving Leeds as a centre is going to look as far afield as Edinburgh?

CASE A

A distribution operation had a CoG near Belper in Derbyshire. We had run across a nearby location before, and had meticulously modelled sites at every motorway access point in a semi-circle from Stafford to Sheffield. In this particular case, the operation showed an extraordinary gap in demand stretching from Wales right through the Midlands. A particularly vigorous operation in Scotland pulled our 95% contour - the ring of locations containing the uncancelled 5% of demand - far further north than anyone had considered practical. Sites north of Manchester proved to have transport costs comparable with those in the Midlands. The rent and rate savings through choosing the less fashionable location were sufficient to buy, crew, fuel and run two drawbar combinations for ever. It would have required a quite astonishing growth of demand in the Midlands to nullify the cost benefits of the M62 corridor.

Added Nov '08.
An engaging and interactive Tool contrasting CoG and CoP. Click here …

Imagination is more important than knowledge. Knowledge is limited. Imagination circles the world. Einstein
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