Warehouse Selection Using Center-of-Gravity Method in Minimizing Transportation Cost
Cecilia Lukardi, Mohammad Hamsal
University of Indonesia, Bina Nusantara University
Abstract
Warehouse selection is a key part in distribution business as it related directly with the company-s service level and cost of the operations. The failure of choosing good warehouse will impact the company-s inability to meet customers- expectation and its financial condition if the costs expended do not meet the expected return. Consequently, it is important to put proper considerations in place before deciding the selected warehouse. By involving the Indonesia branch of a global chemical distributor company as the research subject, this research aims at minimizing transportation cost in selecting a warehouse. In achieving the objective, Center-of-Gravity which also widely known as Centroid method is particularly used, assisting location decision by exploring the spatial distribution of delivery destinations (customers). Aside from that, the weight to each destination also an integral part of the consideration, with the goal of serving more small-to-medium customers. The goal of minimizing transportation costs is translated as minimizing distance to customers due to the directly proportionate nature between distance and transportation costs. This study will generate a set of coordinate points, showing the exact location where total distance to customers are the least as the answer to the research objective.
Keywords: Center-of-Gravity, location decision, spatial distribution
Topic: Operation Management