SSRN Id2382495

Journal
of International Scientific Publication:

Economy & Business, Volume 7, Part 1
ISSN 1313-2555, Published at: http://www.scientific-publications.net

DECISION-MAKING FOR FACILITY LOCATION USING VIKOR METHOD
Snds Da
Department of Production, School of Business, Istanbul University
Avclar Campus, 34322, Avclar -Istanbul, Turkey
Emrah nder
Department of Quantitative Methods, School of Business, Istanbul University
Avclar Campus, 34322, Avclar -Istanbul, Turkey
Abstract
The selection of facility location has become attentively studied problem over the past several years.
The choice of facility location is becoming major challenges that face strategic managers of the
company. Facility location problem includes more than one dimension. For this reason, many criteria
should be considered in the selecting process. In this study, a decision making method Vise
Kriterijumska Optimizacija I Kompromisno Resenje (VIKOR) is employed for this problem. An
application example of a label manufacturer is presented to show the applicability and suitability of the
proposed method. In this study the criteria of facility location selection for the label production company
are raw material supply, proximity to customer, proximity to airport, proximity to harbor,
transportation cost, availability of skilled labor, labor cost, proximity to industrial zone,
government facilities and construction cost (investment cost). Evaluating facility locations and
selecting one of them are complicated tasks due to the fact that various criteria or objectives must be
considered in the decision making process. Also in many real world cases the criteria are not equally
important for the strategic managers.. In this study, we proposed a facility location selection analysis
model considering both Analytic Hierarchy Process (AHP) and VIKOR method. Subjective and
objective opinions of managers/experts turn into quantitative form with AHP. VIKOR technique is used
for calculating the facility locations ratings.
The aim of this paper is to determine the appropriate facility location providing the most companys
satisfaction for the criteria identified. In this paper, data taken from a well-known label company in
Turkey is used to illustrate the facility location selection procedure. The company detects 10 different
criteria for facility location. These are raw material supply, proximity to customer, proximity to
airport, proximity to harbor, transportation cost, availability of skilled labor, labor cost,
proximity to industrial zone, government facilities and construction cost (investment cost).
Apparently, facility location selection is a multi-criteria problem that includes both quantitative and
qualitative factors. It is necessary to make trade-off between these tangible and intangible factors while
considering a suitable location. There are alternative locations. These are Avclar, erkezky,
Hadmky, kitelli and Tuzla. In analyzing the data, AHP and VIKOR methodologies are used for the
outranking of location alternatives.
The C6: Availability of skilled labor (0.266), C10: Construction cost (investment cost) (0.193) and
C7: Labor cost (0.155) are determined as the three most important criteria in the facility location
selection process by using AHP. Proposed model results show that A2 (erkezky) is the best alternative
with Qj value.
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Published by Info Invest, Bulgaria, www.sciencebg.net
Journal of International Scientific Publication:


Key words: Facility Location Selection, Multi Criteria Decision Making, Analytical Hierarchy Process
(AHP), VIKOR Method, Label Company
1. INTRODUCTION
Globalization and todays competitive environment forces companies to reduce costs. The basic
condition for increasing the competition and continuity in domestic and global markets is to control
costs. Locations of production and service operations have a great effect on operating cost and price.
Struggle of cost reducing begins with the decision of facility location. For these reason, selection of
facility location is an important decision for entrepreneurs. Location selection is a strategic decision
which is very difficult and expensive to change in a short time.
Facility location is the most suitable place for a firm to perform basic production activities such as raw
material procurement, production, storage, distribution. Therefore, a firm should select a facility location
which provides lowest costs and maximum profit in the long term. Facility location selection is closely
related to firms production planning activity, production control, material handling and facility layout.
The selection of a facility location among alternative locations is a multi-criteria decision-making
problem including both quantitative and qualitative criteria. All the factors should be taken into
consideration because of the fact that the decisions for location selection compel a firm to work under
same conditions for time. If a company selects the wrong location, it may not have adequate access to
customers, workers, transportation, materials, and so on. Thus, some of the basic principles mentioned
below should be taken into account in the decision process (Kobu, 2008).
The firms requirements should be detected objectively.

All the stages in selection process should be carried out respectively.
Every stage in selection process should be evaluated by experts.
There are many objectives that are usually considered by firms in location problems. Some of them can
be as follows (Farahani et al., 2010):
Minimizing the total setup cost.

Minimizing the longest distance from the existing facilities.
Minimizing fixed cost.
Minimizing total annual operating cost.
Maximizing service.
Minimizing average time/ distance traveled.
Minimizing maximum time/ distance traveled.
Minimizing the number of located facilities.
Maximizing responsiveness.
Facility location selection is treated as a three-stage process in literature, where stage 1 deals with
selection of a geographical region or state; stage 2 deals with the selection of a particular locality; and
stage 3 deals with the selection of the final site.
Factors influencing facility location selection are both complex and closely related to each other.
Competitiveness and profitability are to be considered while determining factors influencing the
selection. There are several classifications for factors affecting location decisions in the literature.
Barutugil divided the factors into two groups; environmental factors and economic factors.
Environmental factors are labor supply, climatic conditions, living conditions, zoning restrictions,
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infrastructure (energy, water). Economic factors are in to the firms control area and affected by
management decisions. Proximity to the market and market size, sources of raw materials, transportation
facilities, construction cost, labor cost, government regulations and taxes.
The general process for making facility location decisions usually is composed of the following steps
(Erturul and Karakaolu, 2008):
1. Decide on the criteria that will be used to evaluate location alternatives.
2. Determine the criteria that are important.
3. Develop suitable location alternatives.
4. Evaluate the alternatives and make a decision.
Another classification is done by Stevenson (2012). The classification table is shown as follows.
Level
Regional
Community
Site
Factors
Considerations
Location of raw materials
Proximity, mode and costs of transportation, quantity available
Location of markets
Proximity, distribution costs, target market, trade practices
Labor
Quality of life
Availability, age distribution of workforce, wage scales,

productivity
Schools, shopping, housing, transportation, cost of living
Services
Medical, fire, police
Attitudes
Pro/con
Taxes
State/local, direct and indirect
Environmental regulations
State/local
Utilities
Cost and availability
Development support
Bond issues, tax abatement, low-cost loans, grants
Land
Transportation
Cost, degree of development required, room for expansion,

parking
Type (access roads, rail spur s, air freight)
Environmental/legal
Zoning restrictions
Table 1 Factors Affecting Location Decisions

The aim of this paper is to identify the appropriate location providing profitability and productivity for
the firm. In this paper, data taken from a well-known label manufacturing company in Turkey is used to
illustrate the facility location selection procedure. We proposed a facility location selection analysis
using AHP and VIKOR methodologies. Subjective and objective opinions of experts turn into
quantitative form with Analytic Hierarchy Process. AHP is applied to determine the relative weights of
the evaluation criteria. AHP approach achieves pairwise comparisons among factors or criteria in order
to prioritize them using the eigenvalue calculation. AHP model was represented in a questionnaire to
survey experts opinions. The relative weight of each factor in the model was calculated. VIKOR
technique is used for calculating the locations ratings.
This paper is arranged into five sections. The second section provides an overview of existing methods
and studies. The third section shows the structure of the problem in the label manufacturing company.
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The next section describes the proposed approach and gives information about AHP and VIKOR
methodologies. In section five, an empirical study is illustrated in the label production industry. Results
of the study are presented in section six. Finally, concluding remarks and discussions follow.
2. LITERATURE REVIEW
In the literature, there are a large number of facility location evaluation and selection methods. In recent
years, multi-criteria decision making methods have been used for facility location decision problem.
The study of location theory started in 1909 when Alfred Weber considered how to locate a single
warehouse in order to minimize total distance between the warehouse and several customers (Farahani
and Hekmatfar, 2009). Some researchers used the analytic hierarchical process (AHP) approach to make
facility location decisions. Zahir (1991) showed how uncertainty in the relative weights of a pairwise
comparison matrix could be used to compute the uncertainties in the relative priorities of the decision
alternatives. Min (1994) proposed AHP approach for the location planning of airport facilities. Yang
and Lee (1997) presented an AHP decision model for facility location selection from the view of
organizations which contemplate locations of a new facility or a relocation of existing facilities. Tzeng
et al. (2002) applied AHP approach on location selection for a restaurant in Taipei. The other study on
a facility location selection was offered by Buldurlu and Ejder (2003). They showed a case study in the
furniture industry using AHP method. Kodal and Routroy (2006) studied on potential facility location
problems in supply chain using AHP. Fernandez and Ruiz (2009) considered the selection of a location
for an industrial park. In their paper, they have proposed a hierarchical decision process. They then used
AHP to find the location. Kuo et al. (1999) proposed a fuzzy-AHP model for the facility location
problems. Kaboli et al. (2007) presented a multi-criteria decision making methodology for the location
problem. A new mathematical model is proposed with the aid of the fuzzy-AHP to make the plant
location decision. Chan et al. (2007) developed a decision making approach for the distribution center
location problem in a supply chain network using fuzzy-AHP concept. Tabari et al. (2008) utilized fuzzy
AHP with objective, subjective and critical factors to select a location for a new facility.
Aras et al. (2004), in which a considerable number of criteria were taken into account for a wind
observation station location selection problem. Cheng et al. (2005) presented the employment of the
ANP to select the best site for a shopping mall. Tuzkaya et al. (2008) used the analytic network process
(ANP) technique to evaluate and select suitable undesirable facility locations based on four main factors,
namely, benefits, cost, opportunities and risks. Gneri et al. (2009) developed a method based on fuzzyANP method for shipyard location selection.
Chu (2002) used fuzzy-TOPSIS for facility location selection under group decisions. Yong (2006) in
which a new fuzzy TOPSIS was presented for selecting a plant location under linguistic terms, as
triangular fuzzy numbers. Another study for the utilization of fuzzy TOPSIS is Wadhwa et al. (2009) in
which the target was a reverse manufacturing chain. nar (2010) developed a fuzzy-TOPSIS model in
order to help a bank selecting the most appropriate city for opening a branch among six alternatives in
the South Eastern of Turkey. The other study is proposed by Verma et al. (2010). The aim of this study
is to select the best location for multi-criteria decision making facility location with interval valued
intuitionistic fuzzy information in which the information about attribute weights is completely known
and the attribute values take the form of interval valued intuitionistic fuzzy numbers. Boran (2011)
proposed the integration of intuitionistic fuzzy preference relation aiming to obtain weights of criteria
and intuitionistic fuzzy TOPSIS method aiming to rank alternatives for dealing with imprecise
information on selecting the most desirable facility location. Li et al. (2011) presented a comprehensive
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methodology for the selection of logistic center location. The proposed methodology consists of two
parts Fuzzy Set clustering method, and TOPSIS.
A comparison of fuzzy AHP and fuzzy TOPSIS methods was developed by Erturul and Karakaolu
(2008) and implemented in a facility location of a textile company. nt and Soner (2008) used fuzzy
TOPSIS approach for transshipment site selection. Criteria weights are derived by using AHP based on
pairwise comparison. Kabir and Sumi (2012) showed an improved and appropriate concrete production
facility location evaluation and selection model has been developed by integrating Modified Delphi and
fuzzy-AHP with TOPSIS method.
Barda et al. (1990) considered thermal power plant location problem as multi-criteria decision problem
and applied ELECTRE III method to select best location. Gndodu (2011) used ELECTRE I method
for selection of facility location under environmental damage priority. Another example is Norese
(2006) who presented an ELECTRE III method to select the best sites for a waste-disposal plant and for
the incinerator.
Athawale and Chacraborty (2010) solved a real time facility location selection problem using
PROMETHEE II (preference ranking organization method for enrichment evaluation) method which is
an effective multi-criteria decision-making tool often applied to deal with complex problems in the
manufacturing environment. Mousavi et al. (2012) proposed an integrated decision-making
methodology composed of three well-known decision-making techniques, Delphi, AHP, and
PROMETHEE in order to make the best selection for plant location.
A real-life problem of a new manner existing in multinational company was introduced by El-Santawy
et al. (2012).A VIKOR method was presented to solve the facility location multi-criteria decision
making problem.
Kaya and Kahraman (2010) used an integrated VIKOR-AHP methodology under fuzzy environment for
determining the best renewable energy alternative and its location for Istanbul. Tavakkoli et al. (2011)
aimed at designing a multi-criteria decision making model for evaluation alternatives potential sites for
a plant location problem. In this paper, a new integrated methodology (VIKOR-AHP) was structured to
solve this selection problem.
Kavitha and Vijayalakshmi (2010) dealed with the selection of call center by using fuzzy-VIKOR and
fuzzy-TOPSIS. Momeni et al. (2011) proposed a fuzzy-VIKOR for plant location selection.
Applicability of the methods of fuzzy-VIKOR and fuzzy-TOPSIS for the problem of selecting the place
of incorporation of airport was investigated by Uluda and Deveci (2013).
The aim of this study is to propose a multi-criteria decision-making approach to evaluate the experts
preference orders, to examine experts perceptions of location selection. The purposes of this study were
to use Saatys analytic hierarchy process (AHP) to investigate the factors that experts consider when
choosing facility, and to derive the relative weight of each factor.
3. STRUCTURE OF THE FACILITY LOCATION SELECTION PROBLEM
An application is performed in a manufacturing company which is well-known label factory in Turkey.
The company was established in 2007 for the purpose of producing self-adhesive and non-adhesive
labels in European standards. The company which operates in a covered of 4000 meter square, has the
capacity of producing 4.000.000 meter square labels annually by using serigraphic, flexography,
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embossed finishing fire gliding print techniques on all kind of compact and laminated material with high
quality technology machinery and well trained cadre, consist of skilled specialist.
The company aims to be a solution partner of its customers in label and packaging sector, carries out
aforesaid activities by pursuing unconditional customer services. Target of the company, with the new
investments, is to double fold their production without sacrificing from the quality.
Capacity of current facility cannot meet the customer demand, for this reason the company management
is planning building a new factory in order to meet growing demand. At the end of the interview with
general manager of the company, following information was obtained related to the new facility. The
company determined five candidate location for the new facility; Avclar, erkezky, Hadmky,
kitelli, and Tuzla. Criteria taken in to account for facility location selection are as follows:
1. Raw material supply
2. Proximity to customers
3. Proximity to airport
4. Proximity to harbor
5. Transportation cost
6. Labor cost
7. Availability of skill labor
8. Proximity to industrial zone
9. Government facilities
10. Construction cost
The candidate locations have advantages and disadvantages. These are shown in Table 2.
Location
Avclar
Advantages
Disadvantages
Proximity to harbour
Shortage of skill labour
Lower transportation cost
Shortage of government facilities
Availability of skill labour

erkezky
Government facilities
Lower construction cost
Hadmky
kitelli
High transportation cost
Proximity to customer
Higher labour cost
Proximity to industrial zone
Proximity to airport
Availability of skill labour
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Away from airport
Higher labour cost



Tuzla
Away from customers
Proximity to harbour
Higher construction cost
Raw material supply
Table 2. Features of Candidate Locations

The company has two kind of raw materials; main raw materials (paint and paper) and conducive raw
materials (stereo, cleaning solutions, washing materials). Main raw materials are provided from abroad
and conducive materials are provided from Turkey. Airport and harbor are factors in terms of
transportation and raw material supply. The company has domestic and international customers.
Proximity to airport is a criterion to transfer customers to the facility. Distribution of the products is
done by highway and seaway. Skilled labor is the most important criteria for the company. The label
production requires skilled staff for continuity. The company wants to work with the person who has
studied printing and publishing technologies. Proximity to industrial zone is the other criteria due to the
supply of raw materials and customers. Government facilities in industrial zones are less than other
regions. Construction costs increase in the city center while decreasing in the periphery of the city.
4. PROPOSED METHODOLOGY
The questionnaire and interview conducted between the dates 12-14 May 2013 is answered by 3 experts
(general manager, marketing manager and production manager). Data were collected from the experts
in their offices. They are asked to compare the criteria at a given level on a pair-wise basis to identify
their relative precedence.
AHP is an effective decision making method especially when subjectivity exists and it is very suitable
to solve problems where the decision criteria can be organized in a hierarchical way into sub-criteria.
The findings of previous studies about factors influencing experts choice of facility location were first
identified by literature review. Experts expressed or defined a ranking for the attributes in terms of
importance/weights. Each experts is asked to fill checked mark in the 9-point scale evaluation table.
The AHP allows group decision making. One of the main advantages of the AHP method is the simple
structure.
4.1. Using AHP to Analyze Priorities
AHP was developed in the 1970s by Thomas Saaty is a multi-criteria decision making (MCDM)
methodology. It has been used extensively for analyzing complex decisions. The approach can be used
to help decision-makers for prioritizing alternatives and determining the optimal alternative using pairwise comparison judgments (Liberatore and, Nydick, 1997; Yoo and Choi, 2006). Weighting the criteria
by multiple experts avoids the bias decision making and provides impartiality (Dagdeviren, 2009).
The AHP is a selection process that consists of following steps (Saaty, 1990, 2008; Saaty and Vargas,
2001):
1. Define the problem and determine the criteria. Factors and related sub factors must be correlated (Lee
et al., 2012).
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2. Structure the decision hierarchy taking into account the goal of the decision.
3. Construct a set of all judgments in a square comparison matrix in which the set of elements is
compared with itself (size nxn) by using the fundamental scale of pair-wise comparison shown in Table
3. Assign the reciprocal value in the corresponding position in the matrix. Total number of comparison
is n.(n-1)/2 (Lee et al., 2012).
Intensity of
Importance
Definition
Explanation
Equal importance
Two activities have equal contribute to the

objective
Moderate importance
Experience and judgment slightly favor one

activity over another.
Strong importance
Experience and judgment strongly favor one

activity over another
Very strong on demonstrated

importance
An activity is favored very strongly over

another
Extreme importance
The evidence favoring one activity over another

is of the highest possible order of affirmation
2,4,6,8
For compromise between the above

values
Sometimes one needs to interpolate a

compromise judgment numerically
Table 3. The fundamental scale of pair-wise comparison for AHP

4. Use overall or global priorities obtained from weighted values for weighting process. For synthesis
of priorities obtain the principal right eigenvector and largest eigenvalue.
Matrix A=(aij) is said to be consistent if aij.ajk=aik and its principal eigenvalue (max) is equal to n.
The general eigenvalue formulation is:
1
w /w
Aw = 2 1
.
w n /w 1
ai j =wi / w j ,
w 1 /w 2
w n /w 2 .
w1 /w n w1
w 2 /w n .
=nw
. .

1 wn
i , j =1,2,....n
Aw =lmax w
For measure consistency index (CI) adopt the value:
315
(1)
(2)
(3)


CI = (l max - n) /( n - 1)
(4)
Accept the estimate of w if the consistency ratio (CR) of CI that random matrix is significant small. If
CR value is too high, then it means that experts answers are not consistent (Saaty, 1980). When CR
value is less than 0.10, consistency of the comparisons is appropriate (Lee, 2012). The CR is obtained
by comparing the CI with an average random consistency index (RI).
CR =
(5)
CI
RI
The following gives the average RI:.

n
10
Random Consistency Index (RI)
0.52
0.89
1.11
1.25
1.35
1.40
1.45
1,49
Table 4. Average RI values

Briefly, maximized eigenvalue, CI and CR are found to obtain the weights of each criterion (Lee et al.,
2012). Experts are asked to compare the criteria on a pair-wise basis to determine their relative
importance. AHP was used in order to determine which facility location selection attributes are
important and precedence order of ten criteria, i.e., raw material supply, proximity to customers,
proximity to airport, proximity to harbor, transportation cost, labor cost, availability of skill labor,
proximity to industrial zone, government facilities and construction cost.
4.2. Using Vise Kriterijumska Optimizacija I Kompromisno Resenje (VIKOR) To Rank The Alternatives
VIKOR (Vise Kriterijumska Optimizacija I Kompromisno Resenje-a Serbian name) was first presented
by Opricovic (1998) and Opricovic and Tzeng (2002), for solving multiple criteria decision making
(MCDM) problems based upon the adoption of L p-metric concept. VIKOR method focuses on ranking and
selection from a set of alternatives in cases of conicting criteria (Chiu et al., 2013). It is a technique for
multi-criteria optimization of complex systems (Opricovic and Tzeng, 2004). Assuming that each
alternative is evaluated according to each criterion function, the compromise ranking could be performed
by comparing the measure of closeness to the ideal alternative (Zhang and Wei, 2013). The various J
alternatives are denoted as a1,a2, , aJ. For alternative aj, the rating of the ith aspect is denoted by fij, i.e.
fij is the value of ith criteria function for the alternative aj; n is the number of criteria (Sanayei et al.,
2010).
Developing of the VIKOR method started with the following form of Lp-metric (Opricovic and Tzeng,
2004, Opricovic and Tzeng, 2007, Tzeng et al., 2005):
n
( fi - fij )
Lp , j = wi *
i =1 ( fi - fi )
*
1
p
1 p ; j = 1, 2,K , J .
(6)
Within the VIKOR method L1,j are used to formulate ranking measure. The solution obtained by minjSj
is a maximum group utility, and the solution obtained by minjRj is with minimum individual regret of
the opponent.
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The compromise solution Fc is a feasible solution that is the closest to the ideal F*, and compromise
means an agreement established by mutual concessions, as is illustrated in Fig. 1 by Df1 = f1* - f1c and
Df 2 = f 2* - f 2c
The compromise ranking algorithm VIKOR is conducted as follows:
Step 1. Determine the ideal fi* and the nadir fi - values of all criteria functions (i=1,2,,n) according
to benefit or cost functions. If the ith function represents a benefit then:
fi - = min f ij
fi * = max fij ,
(7)
If the ith function represents a cost then:
fi - = max f ij
fi * = min f ij ,
j
(8)
Step 2. Compute the values Sj and Rj, j=1,2,,J, by the relations
(f
= w
(f
n
Sj
*
i
i =1
- f ij )
- fi - )
(9)
( fi * - fij )
R j = max wi *
i
( fi - fi )
(10)
Figure 1. Ideal and compromise solution

Where wi are the weights of criteria, expressing their relative importance.
Step 3. Compute the values Qj, j=1,2,,J, by the relation
Qj
(S
=v
(S
j
-
- S*)
- S*
317
(R
+ (1 - v )
)
(R
j
-
- R* )
- R* )
(11)


Where
S * = min S j ,
S - = max S j
(12)
R* = min R j ,
R - = max R j
(13)
and v is introduced as weight for the strategy of the maximum group utility, whereas 1-v is the weight
of the individual regret. Usually the value of v is taken as 0.5 (Liu et al., 2013b)
Step 4. Rank the alternatives, sorting by the values S, R and Q, in decreasing order. The results are
three ranking lists.
Step 5. Propose as a compromise solution the alternative (a') which is ranked the best by the measure Q
(minimum) if the following two conditions are satisfies:
C1. Acceptable Advantage:
Q ( a ) - Q ( a ) DQ
(14)
Where a is the alternative with second position in the ranking list by Q ; DQ = 1 / ( J - 1) ; J is the
number of alternatives.
C2. Acceptable stability in decision making:
Alternative a must also be the best ranked by S or/and R. This compromise solution is stable within a
decision making process s, which could be voting by majority rule (when v>0.5 is needed), or by
consensus v0.5, or with veto (v<0.5). Here, v is the weight of the decision making strategy the
majority of criteria (or the maximum group utility).
If one of the conditions is not satisfied, then a set of compromise solutions is proposed, which consists
of:
Alternatives a and a if only condition C2 is not satisfied, or
M
M
Alternatives a, a,K , a ( ) if condition C1 is not satisfied; and a( ) is determined by the
M
relation Q a ( ) - Q ( a ) < DQ for maximum M (the positions of these alternatives are in
closeness).
The best alternative, ranked by Q, is the one with the minimum value of Q. The main ranking result is
the compromise ranking list of alternatives, and the compromise solution with the advantage rate.
Ranking by VIKOR may be performed with different values of criteria weights on proposed compromise
solution. VIKOR is effective tool in multi criteria decision making, particularly in a situation where the
decision maker is not able, or does not know to express his/her preference at the beginning of system
design. The obtained compromise solution could be accepted by the decision makers because it provides
a maximum group utility. The compromise solutions could be the basis for the negotiations, involving
the decision makers preference by criteria weights.
VIKOR technique is widely used in many fields including marketing (Tsai et al. 2011, Wang and Tzeng
2012), material selection (Cavallini et al. 2013, Jahan et al. 2011, Girubha and Vinodh 2012, Liu et al.
2013), vendor/supplier selection (Hsu et al. 2012, Shemshadi et al. 2011, Sanayei et al. 2010), project
selection (Cristobal 2011, Chen and Wang 2009), company selection (Ycenur and Demirel 2012),
318


service quality evaluation (Kuo and Liang 2011), financial performance evaluation (Yalcin et al. 2012),
tourism policy improvement (Liu et al. 2012, Liu et al. 2013), location selection (Tzeng et al. 2002) etc.
One of the advantages of VIKOR is that VIKOR method proposes a compromise solution with an
advantage rate (Opricovic and Tzeng 2004). Also pair-wise comparisons are avoided.
4.3. Combining AHP and VIKOR to Determine The Rank of Alternatives
In analyzing the data, Analytical Hierarchy Process (AHP) and VIKOR methodologies are used for the
outranking of facility location alternatives. Fig. 2 shows the steps of the proposed method.
Figure 2. Steps of proposed method
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Figure 3. Hierarchical Structure for Supplier Selection
5. SOLVING CASE PROBLEM

To apply proposed method a real world facility location selection problem was solved. In this facility
location selection problem there are 10 criteria and 5 candidate location including Avcilar, erkezky,
Hadmky, kitelli and Tuzla. The hierarchical structure to select the best location is shown in Fig 3.
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Interview were performed with the general manager, production manager and marketing manager in
order to identify weights of the criteria.
Criteria to be considered in the selection of facility location are determined by literature review and
experts in the label firm. Past experience and the back-ground of the experts are utilized in the
determination of the criteria and 10 important criteria to be used for facility location selection are
established. These 10 criteria are as follows: raw material supply (C1), proximity to customer (C2),
proximity to airport (C3), proximity to harbor (C4), transportation cost (C5), availability of
skilled labor (C6), labor cost (C7), proximity to industrial zone (C8), government facilities (C9)
and construction cost (investment cost) (C10).
As a result, only these 10 criteria were used in evaluation and decision hierarchy is established
accordingly. Decision hierarchy structured with the determined alternative locations and criteria is
provided in Fig. 3. There are three levels in the decision hierarchy structured for facility location
selection problem. The overall goal of the decision process is the selection of the optimal facility
location in the first level of the hierarchy. The criteria are on the second level and alternative locations
are on the third level of the hierarchy.
Figure 4. Location alternatives of the problem

After forming the decision hierarchy for the problem, the weights of the criteria to be used in evaluation
process are calculated by using AHP method. In this phase, the experts in the expert team are given the
task of forming individual pairwise comparison matrix by using the Saatys 1-9 scale.
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C1
C2
C3
C4
C5
C6
C7
C8
C9
C10
C1
1,00
4,48
5,94
5,19
2,08
0,24
0,50
2,29
3,17
0,37
C2
0,22
1,00
2,08
1,14
0,24
0,14
0,20
0,32
0,38
0,16
C3
0,17
0,48
1,00
0,69
0,19
0,12
0,15
0,26
0,30
0,14
C4
0,19
0,87
1,44
1,00
0,18
0,13
0,17
0,26
0,35
0,16
C5
0,48
4,22
5,19
5,65
1,00
0,29
0,44
1,82
2,08
0,35
C6
4,16
6,95
8,32
7,61
3,42
1,00
2,62
4,93
5,24
1,44
C7
2,00
4,93
6,60
5,94
2,29
0,38
1,00
3,30
3,42
0,87
C8
0,44
3,11
3,91
3,91
0,55
0,20
0,30
1,00
1,44
0,26
C9
0,31
2,62
3,30
2,88
0,48
0,19
0,29
0,69
1,00
0,22
C10
2,71
6,26
7,23
6,35
2,88
0,69
1,14
3,91
4,48
1,00
Table 5. The pairwise comparison matrix for criteria

Geometric means of experts choice values are calculated to form the pairwise comparison matrix on
which there is a agreement (Table 6). The results obtained from the calculations based on the pairwise
comparison matrix provided in Table 5, are presented in Table 6.
Goverment facilities
0.199
0.042
0.058
0.147
Labor cost
Transportation cost
0.016
0.021
0.032
0.100
Raw material supply

0.000
0.050
0.293
0.091
0.100
0.150
0.200
0.250
0.300
0.350
Figure 5. First experts resulting weights of criteria obtained with AHP
Construction cost (investment cost)

Labor cost
Availability of skill labor
Transportation cost
Proximity to harbor
Raw material supply
0.000
0.278
0.062
0.046
0.025
0.018
0.030
0.050
0.112
0.100
0.100
0.150
Figure 6. Second experts resulting weights of criteria obtained with AHP
322
0.209
0.121
0.200
0.250
0.300


0.117

Labor cost
Transportation cost
Proximity to harbor
Raw material supply
0.047
0.089
0.201
0.273
0.066
0.032
0.019
0.022
0.134
0.000
0.050
0.100
0.150
0.200
0.250
0.300
Figure 7. Third experts resulting weights of criteria obtained with AHP

Labor cost
Transportation cost
Proximity to harbor
Raw material supply
0.000
0.193
0.051
0.063
0.024
0.019
0.028
0.050
0.155
0.266
0.090
0.112
0.100
0.150
0.200
0.250
Figure 8. Overall (geometric mean) resulting weights of criteria obtained with AHP
The C6: Availability of skilled labor (0.266), C10: Construction cost (investment cost) (0.193) and
C7: Labor cost (0.155) are determined as the three most important criteria in the facility location
selection process by using AHP. Consistency ratios of the experts pairwise comparison matrixes are
calculated as 0.059 (expert 1), 0.046 (expert2) and 0.034 (expert 3). They all are less than 0.1. So the
weights are shown to be consistent and they are used in the selection process. The most important
criterion is C6: Availability of skilled labor (0.266) and the least important criterion is C3: Proximity
to airport (0.019).
Expert 1
Expert 2
Expert 3
Geometric Mean
Criteria
Weights (w)
Weights (w)
Weights (w)
Weights (w)
C1: Raw material supply
0,100
0,100
0,134
0,112
C2: Proximity to customers
0,032
0,030
0,022
0,028
C3: Proximity to airport
0,021
0,018
0,019
0,019
C4: Proximity to harbor
0,016
0,025
0,032
0,024
C5: Transportation cost
0,091
0,121
0,066
0,090
C6: Availability of skill labor
0,293
0,209
0,273
0,266
323
0.300


C7: Labor cost
0,147
0,112
0,201
0,155
C8: Proximity to industrial zone
0,058
0,046
0,089
0,063
C9: Government facilities
0,042
0,062
0,047
0,051
C10: Construction cost (investment cost)
0,199
0,278
0,117
0,193
max
10,788
10,613
10,458
10,358
CI
0,088
0,068
0,051
0,040
RI
1,490
1,490
1,490
1,490
CR
0,059
0,046
0,034
Table6. Results obtained by AHP
Alternatives
Finally, VIKOR method is applied to rank the alternative locations. The priority weights of alternative
locations with respect to criteria, calculated by AHP and shown in Table 6, can be used as input of
VIKOR (Table 7).
Weights
0,112 0,028
0,019
0,024
0,090 0,266 0,155
0,063 0,051 0,193
Criteria
C1
C2
C3
C4
C5
C7
C8
Units
Score
Score*
Distance (KM)
Distance (KM)
Score* Score
Currency (TL)
Score* Score
Score*
A1 (Avclar)
19,7
8,7
1500
A2 (erkezky)
101
96,4
800
10
A3 (Hadmky)
43,7
23,6
1200
A4 (kitelli)
13,6
24,8
10
1200
A5 (Tuzla)
10
7,6
12,8
800
C6
C9
Table 7. Input values of the VIKOR analysis

*Less score is better for these variables
The best fi* and the worst f i - values of all criterion functions are shown in Table8.
Criteria
Effect
fi* (Best Value)
f i - (Worst Value)
C1
Raw material supply
10
C2
C3
7.6
101
C4
Proximity to harbor
8.7
96.4
C5
Transportation cost
C6
10
324
C10


C7
Labor cost
800
1500
C8
C9
Government facilities
10
C10
Table 8. The best fi* and the worst f i - values of all criterion functions
C1
C2
C3
C4
C5
C6
C7
C8
C9
C10
S1
0.112
0.009
0.003
0.000
0.000
0.266
0.155
0.000
0.051
0.145
S2
0.045
0.019
0.019
0.024
0.090
0.038
0.000
0.063
0.000
0.000
S3
0.067
0.005
0.008
0.004
0.023
0.114
0.088
0.013
0.034
0.121
S4
0.089
0.000
0.001
0.004
0.068
0.000
0.088
0.025
0.045
0.097
S5
0.000
0.028
0.000
0.001
0.023
0.038
0.000
0.000
0.017
0.193
Table 9. Calculation of Si and Ri for criteria

By using VIKOR method, the ranking of alternative locations are calculated. With using Eq. 12 and Eq.
*
13, we can obtain S = 0.297, S = 0.739, R* = 0.090, R - = 0.266. Table 10 shows the evaluation results
and final ranking of alternative facility locations.
Alternatives
Sj
Rank
Rj
Rank
Qj (v=0,5)
Rank
A1 (Avclar)
0.739
0.266
1.000
A2 (erkezky)
0.297
0.090
0.000
A3 (Hadmky)
0.475
0.121
0.288
A4 (kitelli)
0.418
0.097
0.154
A5 (Tuzla)
0.300
0.193
0.296
Table 10. Calculation of Si and Ri for criteria

C1. Acceptable Advantage: DQ = 1 / ( 5 - 1) =0.25.
Q ( a ) - Q ( a ) DQ 0.154-0<0.25
but Q ( a ) - Q ( a ) DQ 0.288-0 0.25 therefore the positions of A2 and A4 are in closeness.
C2. Acceptable stability in decision making:
Alternative A2 is in the best ranked by Q, S and R. This compromise solution is stable within a decision
making process, by consensus.
325


Depends on the RCj values, the ranking of the alternatives from top to bottom order are A2 (erkezky),
A4 (kitelli), A3 (Hadmky), A5 (Tuzla) and A1 (Avclar) (Table 11). Proposed model results show
that A2 (erkezky) is the best alternative with Qj value. Decision team can also be investigate the top
two alternatives (A2 (erkezky), A4 (kitelli)) one more time. The positions of these two alternatives
are close in VIKOR method.
Rank
Qj
Alternatives
0.000
A2 (erkezky)
0.154
A4 (kitelli)
0.288
A3 (Hadmky)
0.296
A5 (Tuzla)
1.000
A1 (Avclar)
Table 11. VIKOR rankings
6. CONCLUSIONS
Facility location decisions are very important part in any firms overall strategic plan. This paper
presents a multi-criteria decision model for evaluating alternatives in the facility location problem. For
this purpose, a two-step methodology is introduced, in which the AHP determines importance level of
criteria via expertise of decision making team members. Then, VIKOR method applies AHP weights
as input weights. Finally, a facility location problem of a label company was solved by using proposed
method to show applicability and performance of the proposed methodology. By the compromise
ranking method, the compromise solution is determined which would be most acceptable to the decision
makers because it provides a maximum group utility for the majority, and a minimum of
individual regret for the opponents. In next studies analytic network process (ANP) may be used to
structure network and identify dependence among criteria. The proposed methodology can also be
applied to any other selection problem involving multiple and conflicting criteria. Selection of the
facility location can also be done using other MCDM techniques for comparing the results.
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of International Scientific Publication:

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The firms requirements should be detected objectively.

Minimizing the total setup cost.

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Location of raw materials

Proximity, mode and costs of transportation, quantity available

Proximity, distribution costs, target market, trade practices

Availability, age distribution of workforce, wage scales,

Medical, fire, police

State/local, direct and indirect

Cost and availability

Bond issues, tax abatement, low-cost loans, grants

Cost, degree of development required, room for expansion,

Table 1 Factors Affecting Location Decisions

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Shortage of skill labour

Lower transportation cost

Shortage of government facilities

Availability of skill labour

High transportation cost

Higher labour cost

Proximity to industrial zone

Shortage of government facilities

Away from airport

Higher labour cost

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Away from customers

Higher construction cost

Raw material supply

Table 2. Features of Candidate Locations

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Two activities have equal contribute to the

Experience and judgment slightly favor one

Experience and judgment strongly favor one

Very strong on demonstrated

An activity is favored very strongly over

The evidence favoring one activity over another

For compromise between the above

Sometimes one needs to interpolate a

Table 3. The fundamental scale of pair-wise comparison for AHP

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The following gives the average RI:.

Random Consistency Index (RI)

Table 4. Average RI values

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If the ith function represents a cost then:

Step 2. Compute the values Sj and Rj, j=1,2,,J, by the relations

Figure 1. Ideal and compromise solution

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