Location Selection in Global Supply Chains

Supply chain decision problems are becoming more complex with the globalization of businesses spanning several international borders. One such strategic decision problem is the location selection problem, which determines an optimal location to build a new facility. This requires multicriteria evaluation of N alternate locations with respect to M location attributes. The alternate locations could be nations or regions within nations. In this paper we develop a generic framework that can aid the decision maker in identifying and grouping the M attributes into an hierarchy for location selection in global supply chains. An hierarchical structuring is proposed with four fundamental criteria: product/process value chain, economic & political integration, resources & management, and connecting technologies. These are integral to many global business activities and the generic sub-criteria for the above are identified. This aids the decision maker to identify and group the M location attributes as a multilevel hierarchical tree. This structuring facilitates the use of the analytic hierarchy process to synthesize the information about the M attributes along with the decision maker’s preferences, to evaluate the locations. The framework is generic and can be used for locating business operations including industrial plants, R&D centers, call centers, special economic zones, etc. We illustrate the applicability of the framework using a stylized example of locating a Biotech R&D center in Asia.