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Use of multi-criteria decision analysis for location decision: Developing a risk reaction spectrum

Author

Listed:
  • Khan Muhammad Saqiful Alam*
  • Faisal Ibne Wali
  • Md
  • Shahid Hossain
  • Muhammad Maruf Ibne Wali

    () (North South University, Bangladesh)

Abstract

To propose the use of Multi Criteria Decision Analysis (MCDA) as an effective means for location selection, we draw results of findings from case previously carried out on the Strawberry syrup manufacturing plant. Location Decisions are extremely crucial to how a business facility would perform, and whether it would survive, thrive or not. The location affects operations, productivity and even business strategy, and takes into account organizational behavior as well demographics and economics of the location. Location decision making traditionally makes use of either qualitative or quantitative data but not both. The MDCA system tries to make use of both qualitative, quantitative (and more) and helps rank the ten most auspicious locations for the facility. The case in question was a study carried out on the strawberry syrup manufacturing plant of Haque Brothers Industries. They need strawberry syrup to manufacture wafers. They, through this study tried to come up with three perfect locations to set up a factory. Studies were conducted to collect qualitative data as well as quantitative data from the field. Using the MCDA analysis, qualitative and quantitative data are used to form criteria in which to rank each site. The criteria include economic, demographic and physical factors. Using these criteria, the MCDA software IDS is used to come up with ten locations. The study also involved risk analysis, as it considered decisions from leaders with varying risk taking tendencies to form a spectrum. All the data, the weighted criteria is used to come up with a Risk Preference Spectrum for all alternatives. These are used to select the top 3 locations where the facility can be set up. The top three locations were found to meet the criteria in such a way that setting up facilities there would minimize costs and maximize profit via production in any of those locations. These results are then tested again by sensitivity analysis to further verify if the top three locations are indeed ideal, by changing the order of preferences and without letting weights affect the outcome. This would hence add to the credibility and validity of the results. A study of this nature to verify that MCDA can aid an organization in pinpointing locations for its plants and facilities can be monumental to the field of production, operations management and business strategy in Bangladesh. It can be used to revolutionized private as well as public sector.

Suggested Citation

  • Khan Muhammad Saqiful Alam* & Faisal Ibne Wali & Md & Shahid Hossain & Muhammad Maruf Ibne Wali, 2015. "Use of multi-criteria decision analysis for location decision: Developing a risk reaction spectrum," Journal of Developing Areas, Tennessee State University, College of Business, vol. 49(5), pages 505-516, Special I.
  • Handle: RePEc:jda:journl:vol.49:year:2015:issue5:pp:505-516
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    Keywords

    Location Decisions; Decision Making; MCDA; Evidential Reasoning;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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