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Rationale of the Optimal Location of Production: a System Approach

Stadnicki Jerzy, Terebukh Andrii

Management and Production Engineering Review

2022

Vol. 13, No. 3

110--117

The optimal decision regarding the place of production is an essential, sometimes determining factor of its effectiveness. The main drawback in substantiating the optimal location of production is the lack of a system approach to accounting in the analysis of potential sales markets. Orientation, when justifying the optimal location of production, only to some particular sales market (and orientation to specific sales markets is necessary both in terms of taking into account the costs of moving the benefit from the place of production to the places of consumption, and in terms of production capacity, since it depends unit cost of production) is erroneous because it does not take into account many other competitive options. The article develops a system approach to rationale optimal locations and production capacity, based on a comparison of combinations of locally optimal places, the total production capacity of which is equal to the total (system) demand. The variant of combinations of locally optimal places with minimal total costs is systemically optimal. The result of solving the problem will be information about 4 parameters of the production of benefit: “where?” (in what places), “how much?” (in each of these places), “how?” (with what technology in each of these places), “for whom?” (sales markets for each of these places). The system approach proposed in the article to rationale the optimal location of the production of a single benefit can be adapted to a more complex situation, when the optimal location of the production of several benefits is justified at the same time. Further research is promising in the direction of a clearer determination of the boundaries of the space of possible location of production, as well as in the direction of studying the possibility of aggregating potential sales markets.