Optimization of facility location-allocation problem in customer-driven supply chain

This paper develops and applies an integrated multiple criteria decision making approach to optimize the facility location-allocation problem in the contemporary customer-driven supply chain. Unlike the traditional optimization techniques, the proposed approach, combining the analytic hierarchy process (AHP) and the goal programming (GP) model, considers both quantitative and qualitative factors, and also aims at maximizing the benefits of deliverer and customers. In the integrated approach, the AHP is used first to determine the relative importance weightings or priorities of alternative locations with respect to both deliverer oriented and customer oriented criteria. Then, the GP model, incorporating the constraints of system, resource, and AHP priority is formulated to select the best locations for setting up the warehouses without exceeding the limited available resources. In this paper, a real case study is used to demonstrate how the integrated approach can be applied to deal with the facility location-allocation problem, and it is proved that the integrated approach outperforms the traditional costbased approach.