Warehouse location selection using AHP and 0-1 goal programming

Storage has always been an important aspect for economic development. Prior to the betting on the industry, it is necessary for people to handle the storage in a proper system for the well-being of their economic units in their own houses. Storage is one of the key elements of modern supply chains and plays a vital role in the success or failure of today's businesses. The warehouse is a commercial building for storing goods. Warehouses are being used by manufacturers, importers, exporters, retailers, transport operators and so on. In today's dynamic and changing global economy, researchers have underlined the significance of the factors for location selections. Factors affecting the determination of warehouse locations include political, economic, legal, social and cultural factors. Decisions on warehouse location require a significant capital investment and the results are seen to be limited to the distribution of products over the long term. These kinds of problems are complex and real-world problems. The structure causing the complexity of the problem is the fact that both qualitative and quantitative factors are effective in the decision making process and that these factors are compared in the process. The theory of location was first proposed by Weber. Weber worked on the total travel distance through the warehouses to customers. As a result of the studies, depending on the index that study suggests, warehouses should be located whether near the supplier or near the market. The decision process involves defining, analyzing, evaluating and selecting between alternatives. Such a decision is among the most critical decisions of the distribution network design. Positioning, placement selection decisions are one of the most important elements of a company's overall commercial and marketing strategy. Storage also plays a decisive role in terms of long-term profitability and efficiency measures, depending on the company goals. The nature of the current decision-making process requires the use of multi-criteria decision analysis techniques. Multiple criteria selection covers identification of factors affecting settlement, development of measurement factors, determination of relative weights, selection of an efficient design model, calculation of compound benefit, and analysis of the obtained data. Warehouse location selection in alternative places, is a multi-criteria decision making problem that includes both quantitative and qualitative criteria. Such decisions are of great importance to companies because they require costly, irreversible and long-term commitment. It also has an impact on operating costs and revenues. For example, choosing a bad location could result in over-transportation costs, inadequate qualified workforce, loss of competitive advantage, or some similar situation that would damage operations. The general procedure for making location decisions usually consists of the following steps: • Deciding which criteria should be used to evaluate location alternatives • Determination of important criteria • Development of location alternatives • Evaluation and selection of alternatives. The location of a depot is usually one of the most important and strategic decisions in the optimization of logistics systems. It is a long-term decision and is influenced by many quantitative and qualitative criteria; however, some criteria are so important that the decision is predominant. Determination of warehouse locations requires long-term, strategic and effective decision-making that is effective on operating profitability. In this study, it is aimed to both maximize profitability and minimize costs. In addition to the cost and profitability elements, customer service level and customer satisfaction, which are factors that stand out in today's competition conditions, are taken as basis in the evaluations of the managers. For this purpose we have applied the Analytical Hierarchy Process (AHP) and the 0-1 Goal Program (GP), which will enable us to evaluate the alternatives with a customer-centric approach and make decisions to achieve the goal. Analytical Hierarchy Process (AHP) is a decision making technique developed by Saaty 1977. This is a multi-criteria decision-making method in complex environments where many variables or criteria are taken into account in the prioritization and selection of alternatives. It is designed to cope with intelligent and intuitive information to choose the best alternative from a range of alternatives evaluated according to various criteria. The Analytical Hierarchy Process is the theory of measurement by means of pairwise comparisons and it is based on the decisions of the experts to obtain priority scales. Comparisons are made using an absolute judge scale that shows how much one item is dominated by another in terms of a certain quality. Goal programming is the type of programming in which decision-making methods are most widely used. The most important advantage of the researcher is that this programming allows including of multiple targets in the same model and setting the deviations when determining targets. Charnes, Cooper and Ferguson are the founders of this model. First, the goal programming model was written by Charnes, Cooper and Ferguson and published in Management Science magazine in 1955. After determination of goals and constraints to be analyzed by goal programming, the solution process has been completed and the appropriate warehouse location has been determined. In this study, it is discussed how to determine the appropriate warehouse location using AHP and 0-1 Goal Programming from multi criteria decision making methods. The aim of the study is to determine the most suitable location for the purposes by including both quantitative and qualitative values in the decisions of the warehouse location. For this reason, for the company operating in the logistics sector, the factors obtained as a result of negotiations with the managers were first examined in the AHP model with binary comparison matrices and the appropriate warehouse location was determined by AHP. Then, the objective function for the 0-1 HP method was established, constraints were assigned, and the appropriate storage location was determined by a second method, and both methods were compared or made meaningful in a sense. As a result of the study, both AHP and 0-1 GP suggested the same warehouse location as the most optimized one. Haramidere has been identified as the most suitable warehouse location in both AHP method and 0-1 goal programming method. In this case, it is seen that meaningful results can be obtained with both methods applied in determining the warehouse location. Decision makers can open a warehouse in the Haramidere area that best reflects their goals and criteria.