Decision framework for capacity decision in a supply chain

Abstract

Capacity decision in the supply chain is a complex, multi-attribute decision problem that must be accomplished within a constrained resource environment. An Analytic Hierarchy Process (AHP) allows decision-makers to find the priority values of the potential facilities' location in the supply chain by considering the relevant attributes. These priority values have to be maximised, whereas the cost of facilities' locations, which depends upon the number of such locations and their capacity and the cost associated owing to transportation of raw materials between suppliers and facilities' locations and of finished products between markets and facilities locations, have to be minimised while making capacity decision in the supply chain. For this, a decision framework is developed which integrates the AHP with a 0–1 integer-programming model. A simulated annealing model is used for solving the capacity decision problem in the supply chain.