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The maximum return-on-investment plant location problem

Author

Listed:
  • J Brimberg

    (University of Prince Edward Island)

  • C ReVelle

    (The Johns Hopkins University)

Abstract

The standard plant location problem determines which plants to open from a set of potential sites in order to satisfy the demands at a set of customer vertices at a minimum total cost. However, the optimal solution may exceed a limit on investment costs imposed on the enterprise in a practical setting. This paper examines the plant location problem in an environment in which the investment in plant and equipment is also an objective to be minimised. The problem is posed as a bicriterion model which examines the tradeoff between the sum of operational and investment costs and investment cost (or total cost vs sunk cost). A weighting method is used to generate efficient solutions, one of which is shown to maximise the return on investment. The integer-friendliness of the LP relaxation is investigated.

Suggested Citation

  • J Brimberg & C ReVelle, 2000. "The maximum return-on-investment plant location problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(6), pages 729-735, June.
    • Handle: RePEc:pal:jorsoc:v:51:y:2000:i:6:d:10.1057_palgrave.jors.2600943
    DOI: 10.1057/palgrave.jors.2600943
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    Citations

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    Cited by:

    1. Marchioni, Andrea & Magni, Carlo Alberto, 2018. "Investment decisions and sensitivity analysis: NPV-consistency of rates of return," European Journal of Operational Research, Elsevier, vol. 268(1), pages 361-372.
    2. J Brimberg & P Hansen & G Laporte & N Mladenović & D Urošević, 2008. "The maximum return-on-investment plant location problem with market share," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(3), pages 399-406, March.
    3. Mladenovic, N. & Brimberg, J. & Hansen, P., 2006. "A note on duality gap in the simple plant location problem," European Journal of Operational Research, Elsevier, vol. 174(1), pages 11-22, October.
    4. ReVelle, C. S. & Eiselt, H. A., 2005. "Location analysis: A synthesis and survey," European Journal of Operational Research, Elsevier, vol. 165(1), pages 1-19, August.
    5. Menezes, Mozart B.C. & Kim, Seokjin & Huang, Rongbing, 2015. "Return-on-investment (ROI) criteria for network design," European Journal of Operational Research, Elsevier, vol. 245(1), pages 100-108.
    6. Wenxuan Shan & Qianqian Yan & Chao Chen & Mengjie Zhang & Baozhen Yao & Xuemei Fu, 2019. "Optimization of competitive facility location for chain stores," Annals of Operations Research, Springer, vol. 273(1), pages 187-205, February.
    7. Pierre Hansen & Jack Brimberg & Dragan Urošević & Nenad Mladenović, 2007. "Primal-Dual Variable Neighborhood Search for the Simple Plant-Location Problem," INFORMS Journal on Computing, INFORMS, vol. 19(4), pages 552-564, November.

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