Problem 3

Based on your project, you will build a new wooden toy factory located in West
Java. Select the best location for build a new factory from three alternative locations.
You can provide any assumptions for solving this problem. Give details explanation,
reasons and analysis,

Questions:

1. Determine qualitative factors affecting location decisions. Explain and give the
reasons. (min 5 qualitative factors)

2. Determine quantitave factors affecting location decisions. Explain and give the
reasons. (min 2 qualitative factors)

3. Choose the best location using quantitave and qualitative factors using Analytical
Hierarchy Process (AHP).

4. Perform the sensitivity analysis.

Answer :

For alternative location we choose three location on West Java, the first one is on
Cikarang, Cibitung, and last is Sukabumi. We choose this area because factory
location is critical for any industrial sector, so selecting a factory location requires
careful study. When looking for the ideal site for a firm or factory, it's important to
consider the aspects that affect the organization's operations.

1. Qualitative factors
To evaluate the optimum site choice, we used qualitative characteristics such
as market position, transit accessibility, raw material availability, and the
environment.
 Market location
Proximity to the market allows a company to deliver greater customer
service while also reducing shipping expenses. Better service is
frequently the more crucial of these two benefits. Furthermore, the
supplier's location must be considered, as the farther the supplier is
from the customer, the greater the transportation and distribution
expenses will be. The nearest market address and the average distance
between the site and the market are shown in below Table. The
distance is calculated using Google Maps.

Location Average distance

Cikarang 11.1
Cibitung 8.85
Sukabumi 12.1

 Transportation access
One of the determinants of successful delivery is adequate road
infrastructure. Because the location is in the special industrial sector,
transportation of raw materials and auxiliary materials is quite simple.
It is relatively accessible by land vehicles, and it also assists
employees with transportation concerns as well as smooth production
marketing. We presume transit accessibility based on Google Maps
data regarding transportation that can cross the area.

 Raw Material Availability

The availability of raw materials close to the production location is
advantageous to the company since transportation costs can be
 decreased, lowering raw material procurement costs. The location of
the raw material supplier is detailed in the table below.

Location Details
Cikarang Wood Supplier
Cibitung Wood Supplier
Sukabumi Wood Supplier

 Environment
The willingness of a community to accept all of the repercussions,
both positive and negative, of a firm's development in that region is a
criterion for whether or not the business can be formed in that area.
The below table indicates the amount of factory created in that area to
determine the rate of societal acceptance.

Location Amount of Factory in the Area

Cikarang 74
Cibitung 171
Sukabumi 26

2. Quantitative factors
To evaluate the optimum site choice, we used qualitative characteristics such
as market position, transit accessibility, raw material availability, and the
environment.
 Land Cost
Land and building rents are more expensive in metropolitan areas than
in rural areas. If the business owner expects to expand in the future,
the availability of huge expanses of land at a reasonable price should
be considered while choosing a business location.
  Wage rate
The wage rate component is significant in the company since the
success or failure of accomplishing company goals is determined by
labor wage rates. Labor is one of the aspects that influences work
efficiency and lowers manufacturing costs. With the development of
this tiny enterprise, it will be able to absorb labor from the surrounding
region, resulting in new work opportunities that will assist to reduce
the number of unemployed and enhance the standard of life of the
population in the factory's immediate vicinity. Furthermore, current
compensation rate criteria based on rules from the plant location make
workers more accessible. The below Table shows the wage rate and
land cost of location in Cikarang, Sukabumi, and Cibitung.

Location Land Cost Wage Rate

Cikarang Rp 2.500.000/m2 Rp. 4.791.843,90
Cibitung Rp 2.600.000/m2 Rp. 4.791.843,90
Sukabumi Rp 250.000/m2 Rp 3.125.444,72

3. Analytical Hierarchy Process (AHP)

The AHP hierarchical structure is designed to help in decision-making by
taking into account all of the system's decision criteria. The system's aims or
objectives will be sought for answers to these difficulties at the top level of
the hierarchy. There are three hierarchical layers in the model for determining
the site of a wooden toy factory:
 Level I: The goal of the decisions to be made is "Selection of Wooden
Toy Factory Locations," which is at the top of the hierarchy.
 Level II: At the second level, assessment criteria are suggested that
can be used to determine the quality and quantity of alternative
 locations. Market locations, transit access, the environment, raw
material availability, land cost, and labor rate are among the criteria.
 Level III: At the third level, three locations are proposed, namely
Cikarang, Cibitung, and Sukabumi

4. Perform the sensitivity analysis.