The Plant Location and Technology Acquisition Problem

This paper presents an analytical approach for simultaneous optimization of the plant location, capacity acquisition and technology selection decisions in a multi-product environment. The proposed approach can be useful when there is considerable interaction between these structural decisions e.g., in global manufacturing companies. We present a formal definition of the plant location and technology acquisition problem and provide a mathematical model. We describe the analytical properties of the model, which lead to the development of a solution algorithm. Progressive piecewise linear underestimation constitutes the backbone of our solution algorithm. The arising subproblems are amenable to a dual-based approach. We report on a set of experiments that improved our understanding of the interaction among facility design decisions and showed that the computational performance of the proposed solution procedure is quite satisfactory.