Measuring transport costing error in customer aggregation for facility location

Computer technology has advanced to the point where much of the practical analysis for locating facilities, such as warehouses, plants, terminals, and ports, is now handled with the aid of location modeling software. In a recent survey of logistics executives, over two thirds indicated that their companies will use a loca tion model or software to assist in their location analyses within the next year.1 However, the substantial size of practical location problems and the limitations of computer power usually require control of the problem formulation through data aggregation. One common model ing practice is to aggregate individual customer accounts into a limited number of geographic clusters. This reduces the size of the location