Decision-Making for Facility Location Using Vikor Method

Journal of International Scientific Publications: Economy & Business, vol.7, pp.308-330, 2013

23 Pages Posted: 22 Jan 2014

See all articles by Sundus Dag

Sundus Dag

Istanbul University - School of Business

Emrah Önder

Istanbul University - School of Business - Department of Quantitative Techniques

Date Written: 2013

Abstract

The selection of facility location has become attentively studied problem over the past several years. The choice of facility location is becoming major challenges that face strategic managers of the company. Facility location problem includes more than one dimension. For this reason, many criteria should be considered in the selecting process. In this study, a decision making method Vise Kriterijumska Optimizacija I Kompromisno Resenje (VIKOR) is employed for this problem. An application example of a label manufacturer is presented to show the applicability and suitability of the proposed method. In this study the criteria of facility location selection for the label production company are "raw material supply", "proximity to customer", "proximity to airport", "proximity to harbor", "transportation cost", "availability of skilled labor", "labor cost", "proximity to industrial zone", "government facilities" and "construction cost (investment cost)". Evaluating facility locations and selecting one of them are complicated tasks due to the fact that various criteria or objectives must be considered in the decision making process. Also in many real world cases the criteria are not equally important for the strategic managers. In this study, we proposed a facility location selection analysis model considering both Analytic Hierarchy Process (AHP) and VIKOR method. Subjective and objective opinions of managers/experts turn into quantitative form with AHP. VIKOR technique is used for calculating the facility locations’ ratings.

The aim of this paper is to determine the appropriate facility location providing the most company’s satisfaction for the criteria identified. In this paper, data taken from a well-known label company in Turkey is used to illustrate the facility location selection procedure. The company detects 10 different criteria for facility location. These are "raw material supply", "proximity to customer", "proximity to airport", "proximity to harbor", "transportation cost", "availability of skilled labor", "labor cost", "proximity to industrial zone", "government facilities" and "construction cost (investment cost)". Apparently, facility location selection is a multi-criteria problem that includes both quantitative and qualitative factors. It is necessary to make trade-off between these tangible and intangible factors while considering a suitable location. There are alternative locations. These are Avcılar, Çerkezköy, Hadımköy, İkitelli and Tuzla. In analyzing the data, AHP and VIKOR methodologies are used for the outranking of location alternatives.

The "C6: Availability of skilled labor" (0.266), "C10: Construction cost (investment cost)" (0.193) and "C7: Labor cost" (0.155) are determined as the three most important criteria in the facility location selection process by using AHP. Proposed model results show that A2 (Çerkezköy) is the best alternative with Qj value.

Keywords: Facility Location Selection, Multi Criteria Decision Making, Analytical Hierarchy Process (AHP), VIKOR Method, Label Company

Suggested Citation

Dag, Sundus and Önder, Emrah, Decision-Making for Facility Location Using Vikor Method (2013). Journal of International Scientific Publications: Economy & Business, vol.7, pp.308-330, 2013. Available at SSRN: https://ssrn.com/abstract=2382495

Sundus Dag

Istanbul University - School of Business ( email )

Istanbul Business School
Avcilar Campus
Istanbul, 34322
Turkey

Emrah Önder (Contact Author)

Istanbul University - School of Business - Department of Quantitative Techniques ( email )

Istanbul
Turkey

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