Solving a Distribution Facility Location Problem using an Analytic Hierarchy Process Approach

Abstract

Summary: This paper deals with an integrated decision model for determining the location of distribution facilities. As aids in making distribution location decisions, use of decision factor analysis and the analytic hierarchy process is proposed. The location decision model includes a criterion set having 20 criteria divided in 5 groups. For this study, a questionnaire was developed and given to 180 managers in the distribution arena, asking their opinions about the locations of the distribution facilities. The survey results were analyzed based on the location selection criteria. This application of the location decision model to real-world cases, including the recommendation of new distribution facility locations, demonstrates the practical applicability of the research findings. Distribution of products to customers is one of the most crucial activities of a manufacturing company. Facilities location and the distribution process are two key components of a distribution system. These two components are interdependent, and it is necessary to consider location and distribution decisions simultaneously. This study proposes the use of decision factor analysis and the analytic hierarchy process (AHP) as aids in making distribution location decisions. The AHP enables the decision maker to structure a complex problem as a simple hierarchy and to evaluate a large number of often conflicting quantitative and qualitative factors in a systematic manner. Our location decision model includes twenty criteria grouped under 5 categories. For this study, a questionnaire was developed and given to 180 managers asking their opinions about the locations of the distribution facilities. The results were analyzed on grounds of the criteria of selecting locations. As a practical application, several alternatives for the distribution facility locations were evaluated by the location decision model. The goal of this research is to provide decision-makers with a more effective and efficient model for making facility location decisions. In this paper, we show how an integrated decision model can aid location decisions by generating a solution that recognizes the practical considerations while adopting AHP weightings for the decision factors of a qualitative nature. Our integrated decision model is illustrated with a real-world case involving a distribution industry.