APPLYING MONTE CARLO SIMULATION AND RISK ANALYSIS TO THE FACILITY LOCATION PROBLEM

Abstract

Facility location problems have become a more strategic decision than just finding the lowest cost space to house a company's product. When choosing the placement of a distribution center, a company must weigh the new freight costs and the cost of a new or leased structure against its necessary service levels, as well as several other factors. Companies can also save on logistics costs in choosing the correct location by incorporating the inherent risk and variability that are involved in a facility location decision. However, in reality, most companies do not analytically consider risk and variability in choosing a location. This article presents a methodology to help determine candidate locations and then conduct a financial risk analysis to determine the ideal location of a new facility.

Additional information

Notes on contributors

Justin Ridlehoover

JUSTIN RIDLEHOOVER is a Lead Engineer for Schneider National, Inc. in Green Bay, WI. His B.S. and M.S. degrees are in Industrial Engineering from the University of Wisconsin-Madison. At Schneider National, Mr. Ridlehoover is responsible for analyzing and designing supply chain networks for internal and external customers. He can be reached at [email protected].