OPTIMIZATION OF FACILITY LOCATION : A case study focusing on the re-location of production and distribution of Extruded Polystyrene Foam (XPS) in Europe

Abstract: The literature study done in location problems and parameters that a company should consider when taking a location decision for a factory, has been used to solve the Case Study. The case is addressed for a Spanish company that manufactures Extruded Polystyrene Foam (XPS) among other products for building isolation. The company has its production and main markets located in Spain and Portugal, however the expansion to other markets in Europe and Morocco has made the firm face a location of manufacturing facilities decision.  The decision involved determining which two of the three factories the company owns, are more cost efficient for locating the production of XPS. The choice was based on minimizing the total cost, which included the cost of transport of raw material and final products and the workforce cost.  To achieve the most optimal result the analysis was divided in three parts. The first part related with Transportation cost of final product from factory to markets was minimized using the Excel Solver Tool. In the second and third part the workforce costs and the transportation cost of raw material were calculated with the production levels for each factory in each scenario achieved in the first part of the analysis. The proposal for Company A was made considering the results of the quantitative factors analysis as well as some qualitative aspects like centralization or coordination problems. Finally it was concluded that the factory located in Leiria is very profitable and its production should not be move and that the firm should transfer the manufacturing from Tudela to Fontanar if the demand in UK and France will stay stable from 2019 onwards.