Cost Models in Plant Location

In many decision-making situations we are concerned with optimisation in some form, and this very often comes down to cost minimisation. Many of the techniques in this book, and the particular examples quoted, are in fact concerned with cost minimisation. In most cases these are applications of decision theory, linear or dynamic programming, game theory or other particular techniques familiar to operational research workers. As has been discussed, all these techniques depend upon the creation of some form of model of the situation or problem under consideration. Often the use of a model alone is adequate for the solution of a problem, and in this chapter two examples are discussed in which the well-known operational research techniques are left aside in favour of simple graphical models. The first of these is called here ‘Least-cost Route’, and concerns the various decisions that have to be taken in setting up extraction plant for a particular mineral. While the case described relates to a specific example, there is no reason why the same technique should not be used in a wide range of problems. The method is based on simple mathematical techniques for finding the shortest path through a network, and is discussed in the subsequent paragraphs.