PERGAMON

Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

The relocation of a hybrid manufacturing/distribution

facility from supply chain perspectives: a case study
Hokey Min a, *, Emanuel Melachrinoudis b
a

Department of Marketing and Transportation, College of Business, Auburn University, Auburn, AL 36849, USA
Department of Mechanical, Industrial and Manufacturing Engineering, Northeastern University, 375 Snell Engineering Building, 360
Huntington Avenue, Boston, MA 02115, USA

Received 1 November 1997; accepted 18 March 1998

Abstract
In this paper we present a real-world case study involving the re-location of a combined manufacturing and
distribution (warehousing) facility. The relocation decision was called to adapt to dynamic changes in business
environments surrounding the rm's supply chain operations. Such changes include changes in supplier and
customer bases, distribution networks, corporate re-engineering, business climate and government legislation. To aid
management in formulating a more ecient and eective relocation strategy, we designed the conguration of
supply chain networks and assessed the viability of the proposed sites from supply chain perspectives using the
analytic hierarchy process (AHP). # 1998 Elsevier Science Ltd. All rights reserved.
Keywords: Supply chain management; Warehouse location; Analytic hierarchy process

1. Introduction
Due to its strategic importance to the supply chain
competitiveness, the problem of locating manufacturing plants (or warehouses) has received considerable
attention from academicians and practitioners alike
over the last several decades [3, 4, 12, 13]. In general,
the problem of locating manufacturing (or warehousing) facilities is concerned with the determination of
the optimal number, size, and geographic conguration
of those facilities in such a way as to minimize the
total cost associated with supply chain operations (e.g.
start-up investment, material acquisition, transportation, storage and production cost), while satisfying
customer demand requirements. The location decision
usually entails the rm's long-term commitment to the
established facility and thus is not intended to be changed quickly. Due to unforeseen changes in both external and internal business situations, however, some

* Corresponding author. Tel.: +1-334-844-2460; Fax: +1334-826-6939; E-mail: hokeymin@cob-1.business.auburn.edu.

rms may be faced with the decision of relocating the

pre-existing manufacturing and warehousing facilities.
Such changes include changes in customer and supplier
bases, distribution networks, corporate re-engineering
(or restructuring), business climate and government
legislation. In contrast with the typical facility location
problem, the relocation decision must smooth away
diculties involved in the phase-out of the existing
facility and transition to the re-located facility in a
fashion that minimizes any potential disruption of
supply chain activities (see Fig. 1).
In light of the above discussion, this paper describes
a case study of a rm which plans to move its current
manufacturing and distribution facility from Boston,
Massachusetts to a new location in the Northeast US.
Hereafter, we would disguise the name of the rm at
the request of its trac manager and call it Alpha. At
this juncture, Alpha's management does not want to
reveal their relocation plan, because such a plan may
aect the morale of employees working for Alpha's
current facility in Boston. Alpha has its headquarters
in Los Angeles, California and currently operates 49
pure distribution facilities along with ve combined

0305-0483/98/$19.00 # 1998 Elsevier Science Ltd. All rights reserved.

PII: S 0 3 0 5 - 0 4 8 3 ( 9 8 ) 0 0 0 3 6 - X

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H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

Fig. 1. The supply chain network diagram of Alpha.

manufacturing/distribution facilities across the US.

Alpha primarily manufactures and sells chain link
fences and their related hardware items such as aluminum bars, rods, proles and wire, nationwide. To
avoid any duplicated marketing eorts and redundant
production with the pre-existing hybrid manufacturing/
distribution facilities in the Midwest, South and West,
Alpha prefers the re-located site in one of three states:
Maryland, Pennsylvania and West Virginia. In
Maryland, the cities that Alpha is considering are
Baltimore, Hagerstown and Williamsport. In
Pennsylvania, cities of Easton, East Stroudsburg, Erie,
Harrisburg, Pittsburgh and Port Jervis are being considered. Wheeling, West Virginia is also a candidate
city for relocation. In particular, Alpha is looking for
a site that can oer the best level of transit times (e.g.
next day delivery service) for its main customers in the
northeast region of the US and can provide greater
access to its major break-bulk terminals located in
Camp Hill, Lancaster, Harrisburg and York in
Pennsylvania.
Furthermore, since the newly relocated site will serve
as a re-distribution point for Alpha's own products
(galvanized chain links), imported materials and parts,
the optimal site should be in close proximity to intermodal transportation comprised of barges, ocean carriers, motor carriers, and rail. Because of the bulkiness
of its products, however, Alpha seldom uses air transportation and consequently does not prefer a site with
easy access to airports. At the chosen site, Alpha needs
a building structure with size ranging from 80,000 to

120,000 square feet. Alpha's relocated facility is also

expected to occupy approximately 12 to 16 acres of
land so that the site can accommodate the planned
consolidation of the Orioles Fence (a subsidiary of
Alpha) manufacturing plant in Baltimore in late 2000.
Some of the potential sites that Alpha is considering
appear on the surface to oer the amenities described
above, but there is no guarantee that those sites will
bring the most attractive strategic benets to Alpha's
future supply chain operations. For example, a candidate site which gives transportation advantages may
turn out to be most costly because of its urban setting.
On the other hand, a prospective site which incurs the
lowest cost and provides the best tax incentive
packages may be distant from the Alpha's major customer bases and transportation infrastructure. To deal
with this dilemma, systematic decision-aid tools are
needed which consider a multitude of factors aecting
the relocation decision and explicitly consider tradeos
among them. Such decision-aid tools may include various multiple objective programming techniques
(MOP) and scoring methods such as the analytic hierarchy process (see, for example, in Refs. [5, 11, 18]
excellent discussions of MOP and scoring methods).
There are comparative advantages and disadvantages
associated with these decision-aid tools in terms of
ease of use, data requirements, computational diculty
and sensitivity analysis capability.
Considering that the relocation problem confronting
Alpha must deal with a relatively large number of
attributes within a hierarchical framework, we propose

H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

an analytic hierarchy process (AHP), which was rst

introduced by Saaty [17], as our decision-aid tool.
Also, AHP is more appealing than MOP to the practicing logistics manager who may have a limited technical background. Another advantage of the proposed
AHP model is its ability to solve a practical size location problem without serious computational diculty, whereas the models requiring MOP techniques
such as constrained, multi-criteria simplex and adaptive search methods necessitate extensive search of
non-dominated solutions and thus severely limits its
usage for the inherently dicult location problem [6].
In fact, application of AHP to the site selection problem is not uncommon as illustrated by the prior
works of Wu and Wu [21], Hedge and
Tadikamalla [10], Erkut and Moran [8] and
Min [15, 16].
2. Location factors
To identify the criteria to be used for the ranking of
proposed sites, we take into account a total of 45
dierent factors that may potentially aect the relocation decision. These factors were initially presented for
review to a team of Alpha management comprised of
the Director of Manufacturing, the Vice President of
Sales and Marketing and the Director of Operations.
This team singled out a list of factors that were felt to
be important to the supply chain activities of three divisions: manufacturing, sales and marketing and operations. To maintain a manageable number of location
factors for evaluation, we eliminated 12 factors that
were perceived to be insignicant to the relocation decision by the team. As a result, we compiled a total of
33 location factors and broke down these factors into
six broad categories (criteria) to structure these factors
in a hierarchical form. These six categories are:
(1) Site characteristics: since a modern, wellequipped manufacturing/distribution facility requires a
large building with area of approximately 100,000
square feet, the recommended depth (foundation) ranging from 150 to 175 feet and clear height of 24 to 40
feet, we (the location planners) have considered sitespecic features such as building design, capacity, soil
condition (e.g. compaction, drainage and grade elevation) and deed restrictions on the propose site. In
particular, Alpha is planning provisions for potential
expansion that can accommodate the consolidation of
the Orioles Fence manufacturing operation; therefore,
enough room for building expansion is an attribute
that cannot be overlooked by the management team.
Also, we have investigated how the proposed site is
zoned and whether the chosen location is qualied for
special zone delivery rates. In an improper zone, Alpha
may not obtain building, utility and Fire Marshall per-

77

mits which are necessary for site preparation and

building construction.
(2) Cost: cost is one of the primary concerns of the
relocation decision. The total costs of relocating a
hybrid manufacturing/distribution center to a new site
encompass costs associated with land acquisition,
appraisals, building construction including railroad siding, architectural fees, zoning permits, ad valorem
property tax (e.g. levied at 40 to 60% of the appraised
value of property), maintenance including liability
insurance premiums and operation (e.g. labor and utility). Among these cost elements, both land acquisition
and building construction would be a substantial
investment because Alpha requires 12 to 16 acres of
land space. In the case of Williamsport in Maryland,
for example, land acquisition cost for an industrial site
of such size, zoned with water, sewer and rail, can
range from US$420,000 to US$720,000. In addition,
building construction cost alone may require millions
of dollars of a capital outlay. For example, Ackerman
and LaLonde [2] estimated that construction of a new
24-foot clear building would cost the company
US$18.15 per square feet in 1980. Using this conservative gure adjusted for the average annual ination
rate of 3%, construction cost of 100,000 square feet of
a new building today is estimated to be almost
US$3,000,000. Such a large cost gure would put great
nancial strain on the rm undertaking the relocation
project and subsequently burden the rm's shareholders.
(3) Trac access: since Alpha primarily deals with
relatively heavy and bulky hardware products, we have
looked for a site that can not only handle the large
volume of trac, but can also provide easy access to
transportation infrastructure and trac related services. To elaborate, important trac concerns include
proximity to major interstate highways, any overhead
construction impairing truck movement, curfew restrictions on hours of trac operations, railroad and barge
access, close distance to break-bulk terminals and the
availability of freight forwarding and brokerage services. In addition, Alpha requires that the site be
within one day delivery range to most of its main customers such as Home Depots and Lowes in the
Northeastern US. Finally, a site in the vicinity of
foreign trade zones (FTZs) or customs bondage storage may be more attractive, because Alpha can save
or delay the duty payment for its materials and parts
(e.g. steel fence ttings, pipes and fasteners) imported
mainly from China, Taiwan and South American
countries.
(4) Market opportunity: the protability of Alpha
depends heavily on the market potential of the area it
serves. In a broad sense, the market potential of a chosen trading area is dictated by the business climate and
the competition level in the trading area. As a barom-

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H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

eter for the local business climate, we considered the

potential customers' aggregated eective buying power
and buying power index in the area (metropolitan city
or county) that surrounds the proposed site. Herein,
eective buying power is expressed as net gross personal income (=gross personal income personal taxes non-tax payments). Buying power index is a
measure of market ability to buy, expressed as a percentage of US totals. In addition, Alpha's past sales
volumes and forecasted future business growth are
taken into consideration. Furthermore, the regional
ranking as either principal or regional business center
is factored into the site selection decision.
Under the premise that a majority of customers
would be gravitated toward the rm's distribution
facility closer to their population center, we use proximity to existing and potential customers as part of a
surrogate measure of Alpha's competitive position in
the trading area. Also, considering that the Alpha site's
being overlapped by its own pre-existing facility may
weaken its competitive position, we consider proximity
to other Alpha facilities as another part of a surrogate
measure. Finally, since short inbound delivery to the
facility can reduce order cycle time for the entire
supply chain and subsequently help serve customers
better, proximity to Alpha's suppliers' locations is considered as an indicator of Alpha's competitiveness in
the trading area. Given that the amount of rates (e.g.
class rates) for the transportation of freight increases
as mileage scales (e.g. rate basis numbers) increase,
proximity to Alpha's suppliers scattered around
Illinois, Missouri, New York, Connecticut and
Massachusetts also aects inbound shipping cost.
Furthermore, since Alpha's sources of supply include
foreign suppliers in Far Eastern and South American
countries, proximity to major ports of entry such as
Houston, New Orleans and Tampa is also factored
into the relocation decision.
(5) Quality of living: since the proposed manufacturing and distribution facility is expected to hire hundreds of employees including plant workers and truck
drivers whose labor productivity and turnover may be
aected by quality of life in their residence or work,
we take into account local climate, crime rate, pollution, living expense and trac congestion for the
relocation decision. For example, many truck drivers
will be reluctant to be relocated to a high crime and
congested area, even though such reluctance may
increase their unpaid `dead head' trips to their home.
As such, the site with unfavorable quality of living is
likely to cause high driver turnover which, in turn,
may severely disrupt Alpha's trac operations.
Similarly, plant workers and their spouses may be
unwilling to be relocated to the area where quality of
life is no better than their current residence or work.
Consequently, Alpha will be forced to hire a large

number of new employees to replace current workers.

Since new hires at the relocated site may be less familiar with Alpha's supply chain operations than are
current employees, the site with relatively poor quality
of life may aect labor productivity at the relocated
facility.
(6) Local incentives: in an eort to amortize huge
start-up investment for a new site and increase the
return-on-investment from the newly established facility, we have made local incentives an `up-front' consideration. According to the recent Conway Data
global survey of development organizations [20], local
incentives such as labor quality, tax breaks and loans
were considered one of the ve most important location factors by thousands of economic development
executives. In particular, the Alpha management team
is greatly concerned with potential labor strife and
tough local nuisance and environmental regulations.
As a matter of fact, the risk of strikes or other labor
disputes is a key concern in warehousing because such
a risk can disrupt continuous distribution of products
to customers [1]. Thus Alpha wishes to nd a site
where good labor-management relations can be sustained over an extended period of time. In addition,
Alpha is in favor of a site where a broad range of tax
incentives (e.g. enterprise zone incentives, job creation
tax credits or super tax credits for capital investment
and job creation) and industrial park services are available. For example, in the state of Maryland, a company located in the enterprise zone may be eligible to
receive tax credits of 80% during the rst ve years,
while US$1,500 per employee job creation tax credits
may be oered under a certain condition.
Given the above factors, the relocation decision
addresses the following issues:
(1) Which relocation at the hybrid manufacturing
and distribution facility can maximize Alpha's longterm protability.
(2) How to analyze the tradeos among the six location criteria described above.
(3) How to evaluate the sensitivity of relocation decisions with regard to changing priorities of Alpha's
strategic plans.
3. AHP model design and application
In general, AHP is a scoring method that was
designed to visually structure a complex decision problem into a simple hierarchy and then develop priorities within each level of the hierarchy by carrying out
simple pairwise comparisons of the relative importance
of decision criteria, attributes, and alternatives. For a
conceptual foundation of AHP, the interested reader is
referred to Refs. [9, 17, 19]. The use of AHP is suitable
for a relocation decision facing Alpha for two main

H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

reasons: (1) AHP is an eective tool for dealing with a

relocation decision involving a large number of tangible (e.g. cost) and intangible (e.g. quality of living) location factors with dierent scales; (2) with a userfriendly feature, AHP allows the location planner to
not only visualize preferences among the relocation
alternatives, but also identify inconsistent judgments
and correct them during the decision process.
To demonstrate how the AHP model works and to
verify its usefulness, the model was applied to the realworld problem facing Alpha. As explained earlier, the
Alpha management team initially identied ten possible industrial sites. However, since simultaneous
evaluation of the ten dierent sites would require an
excessive number of pairwise comparisons (i.e. 7,020
comparisons) and consequently overwhelm the location
planners' consistent judgment capabilities, some of
these sites were screened using an AHP-based stratication scheme analogous to Erkut and Moran's
method [8]. For instance, some potential sites such as
East Stroudsburg, Port Jervis and Easton are relatively
close to each other and have exhibited similar location
characteristics in terms of trac access, market opportunities and local incentives. After a series of pairwise
comparisons of similarly located candidate sites using
AHP, we identied the most dominant (single best) site
in each state. In the state of Maryland, we selected
Williamsport as the nal candidate site, while
Harrisburg turns out to be the most favorable site
among six potential sites in the state of Pennsylvania.
Therefore,
the
three
sites:
(1)
Harrisburg,
Pennsylvania, (2) Williamsport, Maryland and (3)
Wheeling, West Virginia still remain as a nal list of
sites for further consideration. These three nal candidate sites appear at the bottom level of a hierarchy
shown in Fig. 2. To complete a hierarchical representation of the relocation decision, we aggregate 33 location factors into six broad relocation criteria
(clusters) and then branch these criteria at the second
level of a hierarchy (see Fig. 2). To validate these criteria, we used the two simple rules: (1) the specic location factors belonging to the same criteria are
commensurate (homogeneous) with each other and (2)
the list of criteria should be limited to a reasonably
small number that allows for consistent pairwise comparisons (relative measurement). In fact, Miller [14]
observed that an ordinary decision maker could not
handle more than seven or nine decision elements (e.g.
criteria and alternatives) simultaneously without being
confused.
Similar rules described above were also used to dene location attributes under the third level of a decision hierarchy. As such, we identied 26 location
attributes that mostly coincide with original location
factors with the exception of some cost elements. For
instance, cost elements associated with land acqui-

79

sition, building construction, and zoning permits are

clustered together as `start-up' costs because all of
those are xed cost components expressed in dollar
terms. On the other hand, variable cost elements associated with labor, maintenance, insurance, utility and
compensated fringe benets are grouped together as
`operating' costs. After constructing the complete hierarchy, we have made pairwise comparisons of decision
criteria, attributes, and alternatives rather than using
absolute measurement scales since absolute measurement tends to be very subjective. Relative weights of
relocation criteria were derived from such pairwise
comparisons and summarized in Fig. 2. Herein, these
relative weights represent the Alpha management
team's judgments (or opinions) on the relative importance of the relocation criteria to the relocation decision. In the last step of the AHP process, the relative
weights are aggregated to produce a set of synthesized
priorities (local and overall priority scores) for the
three nal candidate sites using EXPERT CHOICE [7].
Table 1 recapitulates local priority scores with respect
to location attributes.
The overall priority for each prospective site is outlined in Fig. 3. As shown in Fig. 3, Harrisburg turns
out to be the most preferable site among the three
alternatives, with an overall priority score of 0.374. To
elaborate, Harrisburg appears superior to the other
two alternatives with respect to trac access and market opportunity. For instance, the Harrisburg area is
the home to the second largest rail yard in the US and
is served by several competing class one railroads such
as Burlington Northern/Santa Fe, Conrail, Delaware
and Hudson and Canada Pacic. The Harrisburg area
also has the fourth largest interstate and regional highway network in the US and is served by more than 30
motor freight common carriers. The major ports such
as New York and Philadelphia can all be accessed in
one day, not to mention the immediate access to intermodal terminals and break-bulk operations in the
vicinity of Harrisburg. In addition to excellent trac
access, Alpha can reach its major customers (home
improvement stores) located in Dickson City,
Mechanicsburg,
Reading,
Pennsylvania
and
Gaithersburg, Maryland quickly from the Harrisburg
site. Furthermore, Harrisburg is at the core of the central market that can serve more than 70 million populations within a 300 mile radius.
On the other hand, Williamsport is a close second,
surpassing both Harrisburg and Wheeling sites in
terms of cost and quality of living, whereas Wheeling
provides the greatest location incentives among the
three potential sites. To elaborate, Williamsport's rural
setting and relative low cost of living (e.g. cost of living index = 100.8) translate into aordable land prices
and low operating costs. For instance, average hourly
earnings for a warehouse specialist in Williamsport are

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H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

Fig. 2. A hierarchical representation of the relocation of a hybrid manufacturing/distribution facility.

US$10.50, slightly below the US national average of

US$12.06. In addition, Williamsport has no county tax
and its state corporate income tax is more than 22 percent lower than Harrisburg and Wheeling. Such a low
tax rate may contribute to low operating cost.
Considering the above merits, we recommend
Williamsport as a backup alternative or a possible con-

tingency. To assure that Williamsport is superior to

other sites (e.g. Pittsburgh and Easton) in
Pennsylvania, alternative sites that were eliminated in
the pre-screening process are revisited for further consideration as a backup. Our analysis indicates that
Williamsport still outperformed other Pennsylvania
sites such as Pittsburgh and Easton. For instance,

H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

81

Fig. 3. A value path for the overall priority of relocation alternatives.

Williamsport produced the overall priority score of

0.449, whereas Easton and Pittsburgh scored 0.328 and
0.223, respectively.
Thus far, we have identied Harrisburg as the
metropolitan area which is best suited for the Alpha's
relocated facility. However, considering that two separate properties in the same geographical area (e.g.
Harrisburg) may have dierent site-specic characteristics, a more detailed analysis has to be performed to
determine a particular property in that area. With the
help of local development agencies such as Capital
Region
Economic
Development
Corporation
(CREDC) and Pennsylvania Power and Light
Company, we identied two commercial properties
that meet the basic requirements for Alpha's facility location. Both of these properties are located in Swatara
Township in Harrisburg and belong to a Commercial
Limited zoning district where warehousing and manufacturing/assembly uses may be permitted upon review
and approval of the local zoning ocer. Also, they are
located just o the Interstate Route 83 and can easily
access Interstate Routes 283 and 81 and the
Pennsylvania Turnpike (I-76).
Since neither one of them has any distinctive advantage over the other with respect to trac access, market opportunity, quality of living, and local incentives,
our comparison of these properties is primarily based
on their site-specic characteristics and cost. To elaborate, one of them (called property A hereafter) has

114,500 square feet of an old building structure that

can be leased for a minimum of 5 years at an annual
cost of US$423,650, whereas another one (called property B hereafter) has about 80,000 square feet of production and warehouse space for sale at an
undisclosed but estimated price of US$2 million.
Additional cost may be incurred for both of these
properties. For example, property A requires extensive
structural repairs including the installation of an air
conditioning system, whereas property B will be
assessed with an estimated real estate tax of US$20,000
(county and school). In addition, we considered a list
of specic physical characteristics such as total square
footage, ceiling height, oor level, column spacing,
construction materials, heating, ventilation, air conditioning, plumbing, lighting, electric capacity, sprinkler systems, rest rooms, oce spaces, parking spaces,
loading docks and drive-in doors. In terms of building
specications, property A seems to be superior to
property B. For example, property A has the more
desirable ceiling height (31 feet clear ceiling) and
square footage than property B. On the other hand,
property A seems to be a more costly option than
property B in the long run, since the former's 5 year
leasing cost alone may exceed the purchase price of the
latter. Therefore, the nal selection of these properties
may depend on Alpha's lease, buy or re-building decisions which are beyond the scope of this study.

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H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

Table 1
Local priority scores of prospective sites
Criteria/attributes
(1) Site characteristic
Land capacity and landscaping
Compatibility with the current site
Deed restrictions
Building conguration and size
Room for building expansion
Soil conditions for the proposed sites
(2) Cost
Facility establishment costs
Facility operating and maintenance costs
(3) Trac access
Proximity to on and o ramps to highways
Proximity to main rail lines
Proximity to truck terminals
Proximity to waterway
(4) Market opportunity
Proximity to customers locations
Proximity to suppliers locations
Proximity to competitors' locations
Proximity to other Alpha facilities
Market potential

Prospective sites

Priority scores

Ranks

Harrisburg
Williamsport
Wheeling
Harrisburg
Williamsport
Wheeling
Harrisburg
Williamsport
Wheeling
Harrisburg
Wheeling
Williamsport
Williamsport
Wheeling
Harrisburg
Harrisburg
Williamsport
Wheeling

0.007
0.006
0.005
0.007
0.006
0.004
0.014
0.014
0.013
0.011
0.010
0.009
0.006
0.006
0.005
0.010
0.010
0.009

Williamsport
Wheeling
Harrisburg
Wheeling
Williamsport
Harrisburg

0.038
0.035
0.027
0.028
0.028
0.026

1
2
3
1 (tie)
1 (tie)
3

Harrisburg
Williamsport
Wheeling
Harrisburg
Williamsport
Wheeling
Harrisburg
Williamsport
Wheeling
Wheeling
Williamsport
Harrisburg

0.024
0.012
0.008
0.032
0.019
0.013
0.046
0.012
0.004
0.020
0.015
0.010

1
2
3
1
2
3
1
2
3
1
2
3

Harrisburg
Williamsport
Wheeling
Harrisburg
Williamsport
Wheeling
Williamsport
Wheeling
Harrisburg
Harrisburg
Williamsport
Wheeling
Harrisburg
Williamsport
Wheeling

0.020
0.010
0.007
0.013
0.012
0.011
0.011
0.007
0.002
0.015
0.015
0.006
0.022
0.010
0.003

1
2
3
1
2
3
1
2
3
1 (tie)
1 (tie)
3
1
2
3

1
1

1
1
1
1

1
2
3
1
2
3
(tie)
(tie)
3
1
2
3
(tie)
(tie)
3
(tie)
(tie)
3

continued opposite

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83

Table 1continued
Criteria/attributes

Prospective sites

(5) Quality of living

Climate and pollution
Crime rate
Living expense
Local trac congestion

(6) Local incentives

Strength of local labor unions
Availability of skilled labor
Availability of investment tax incentives
Industrial park services
Toughness of local nuisance/environmental laws

0.013
0.008
0.004
0.012
0.009
0.005
0.009
0.008
0.008
0.027
0.010
0.009

1
2
3
1
2
3
1
2 (tie)
2 (tie)
1
2
3

Williamsport
Wheeling
Harrisburg
Harrisburg
Wheeling
Williamsport
Williamsport
Wheeling
Harrisburg
Harrisburg
Wheeling
Williamsport
Wheeling
Williamsport

0.028
0.014
0.009
0.012
0.006
0.002
0.008
0.006
0.006
0.012
0.006
0.002
0.026
0.017

1
2
3
1
2
3
1
2 (tie)
2 (tie)
1
2
3
1
2

Although a base-line solution reected the current

relocation scenario where trac access is most important, the model solution can change in accordance with
shifts in Alpha's strategic plans. To explore the response of model solutions to potential shifts in the priTable 2
Sensitivity analyses of location criteria
Degree of sensitivity

Site characteristics
Cost
Trac access
Market opportunity
Quality of living
Local incentives

insensitive
sensitive
a little sensitive
insensitive
sensitive
sensitive

Ranks

Williamsport
Harrisburg
Wheeling
Wheeling
Harrisburg
Williamsport
Wheeling
Williamsport
Harrisburg
Williamsport
Wheeling
Harrisburg

4. Sensitivity analysis

Location criteria

Priority scores

"Sensitive" = a ranking of all the prospective sites changes

dramatically in the entire weight range.
"A little sensitive" = a ranking of two prospective sites
changes gradually in the very limited weight range.
"Insensitive" = a ranking of all the prospective sites remains
the same in the entire weight range.

ority of Alpha's strategy, a series of sensitivity analyses

of criteria weights were performed by changing the priority (relative importance) of weights. As summarized
in Table 2, the results indicate that the model solutions
are sensitive to changes in the importance of cost,
quality of living and local incentives. Specically, when
the importance of cost is increased from 0.181 to 0.35,
Williamsport is the best site. Even Wheeling will be
more attractive than Harrisburg if the weight assigned
to cost is 0.65 or greater. A similar pattern can be
observed when Alpha prioritizes quality of living for
the relocation decision. For example, when the importance of quality of living is increased from 0.122 to
0.35, Williamsport dominates the other two sites.
Notice also that the rankings of the prospective sites
constantly change across the entire weight range in accordance with changes in the importance of local
incentives. Specically, Williamsport will be the best
site if the weight of local incentives is increased from
0.164 to 0.40, whereas Wheeling will be the best site if
the weight of local incentives is close to 1.00. However,
it may be worth noting that Wheeling is dominated by
Williamsburg, with the exception of the fact that

84

H. Min, E. Melachrinoudis / Omega, Int. J. Mgmt. Sci. 27 (1999) 7585

Wheeling scores slightly higher than Williamsport on

local incentives (see Fig. 3).
On the contrary, the model solutions are insensitive
to changes in the importance of site characteristics and
market opportunity, since Harrisburg remains the best
site regardless of changes in such importance. Finally,
the model solution is little sensitive to changes in the
importance of trac access, because Williamsport can
be the more preferable site than Harrisburg only when
the weight of trac access is decreased from 0.216 to
0.15. These sensitivity analysis results provide Alpha
with practical insights into what-if scenarios. For
example, practically speaking, Williamsport could be a
good substitute for Harrisburg if Alpha is severely
restrained by a budget limit or Alpha depends heavily
on private carriers for its inbound and outbound transportation of goods. Also, if a majority of Alpha's current employees are reluctant to relocate to a new site
from the existing facility in Boston due to their concerns over the deteriorating quality of life,
Williamsport can be more appealing than Harrisburg.
In the case that local incentives oer Alpha a substantial reduction in tax burden and risks of a labor strife,
either Wheeling or Williamsport may be preferred over
Harrisburg.
5. Concluding remarks
Since location of a hybrid manufacturing/distribution facility dictates the physical ow of goods from
sources of supply to consumption points, such a location decision is at the core of strategic supply chain
network planning. We have applied the AHP approach
to the relocation problem facing a rm which primarily
manufactures and distributes home improvement hardware. The proposed AHP model was designed to nd
the most preferred site as well as its relative advantages
over other candidate sites. The model is capable of
handling multiple conicting objectives such as the
minimization of cost, trac accessibility, the maximization of market opportunities and local incentives.
Consequently, it can aid the location planner in analyzing the various tradeos among the competing
objectives and the implications of strategic relocation
decisions.
As part of contingency planning, the model enables
the location planner to evaluate `what-if' scenarios associated with shifts in the company's management philosophy and competitive positions. In addition, the
model enables the location planner to determine the
extent of conicts among the competing objectives.
Unlike MOP techniques, the proposed model not only
captures many realistic dimensions involving a large
number of location factors, but also poses little computational diculty. As such, the model is likely to be

recommended as a practical decision making tool by

many practitioners confronting similar problems.
Despite the above merits, the proposed model points
to a number of directions for future work: the model
can be expanded to include the element of risk and
uncertainty involved in the hybrid plant/warehouse
relocation project and it can be tested for an expanded
regional area and for a longer time period.

Acknowledgements
The authors wish to thank Charlotte Chancellor of
the Conway Data, Mary Burkholder of the Maryland
Department of Business and Economic Development,
Stephen L. Christian, Jr. of the West Virginia
Development Oce, Sheila Cerulli of the Pennsylvania
Power and Light Company, Carol Kilko of the Capital
Region Economic Development Corporation and
Charles Van Keuren, Jr. of the Lehigh Valley
Economic Development Corporation for providing the
authors with invaluable data and insights into the site
feasibility and evaluation studies. Also, the authors
want to express the deepest gratitude to the management team and trac manager of the anonymous company for providing the authors with valuable
assistance in the case study reported in this paper. Last
but not least, the authors want to thank three anonymous reviewers for their invaluable comments on an
earlier version of the paper.

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