December 2012. Vol. 1, No.2 ISSN 2305-8269 International Journal of Engineering and Applied Sciences © 2012 EAAS & ARF. All rights reserved www. eaas-journal.org 64 LOCATION DECISION OF SUPPLY CHAIN MANAGEMENT IN THE AUTO MOTIVE INDUSTRY Atefeh Amindoust 1 , Shamsuddin Ahmed 2 , Ali Saghafinia 3 Department of Engineering Design and Manufacture, Faculty of Engineering, University of Malaya, Malaysia 1,2 Electrical Engineering Department, Faculty of Engineering, University of Malaya, Malaysia 3 atefeh_amindoust@yahoo.com ABSTRACT Plant location decision as a start point to success the supply chain of firms have been received more attention today. One of the Malaysian automotive industries which intend to find a location to extend its company is considered in this study. Since, the location decision involves multiple criteria the appropriate tools must be applied to solve this issue. So, this paper applies data envelopment analysis (DEA) to select appropriate location and the selection criteria which derived from literature and interviews are considered as inputs and outputs for DEA model. Keywords: Supply chain, location decision, automotive industry, DEA 1. INTRODUCTION Due to the recent agile improvement of network technology and economic globalization, supply chain management (SCM) has come to play a critical role as a key to business activities [1]. One of the most important and far reaching decisions in SCM faced by operations managers is deciding where to locate new manufacturing facilities. This is a strategic decision involving irreversible allocation of the firm’s capital, and often has a crucial impact on key measures of the firm’s supply chain performance such as lead time, inventory, and responsiveness to demand variability, flexibility, and quality. With the emergence of efficient supply chain management as an important frontier of competition, the facility location decision becomes even more significant. Centrally located in the ASEAN region with a population of more than 500 million people, Malaysia offers vast opportunities for global automotive and component manufacturers to set up manufacturing and distribution operations in the country. Pragmatic government policies, political and economic stability, sound economic fundamentals, well developed infrastructural facilities and an educated and skilled labor force have attracted major international automotive and component manufacturers to invest in Malaysia. This paper is organized to determine the location selection criteria through literature and face to face interviews with operation managers. Then, a DEA model is suggested using those criteria onto selecting the best locations. 2. LOCATION SELECTION CRITERIA IN AUTOMOTIVE INDUSTRY Going through location decision literature, the most popular criteria on this issue are determined. These criteria are including Cost, Infrastructure, Business services, Labour, Government, Customer/market, Supplier/resources, and Competitors [2-8]. In this work, some meetings were adjusted to have face to face interviews with experts and staffs of operation management team in automotive industry to derive the vital criteria for location selection process. It is worthy to say that Infrastructure, Competitor, and Customer/market are omitted in these meetings and receive no attention. So, the remained five criteria were considered to select the best locations. For more clearance about applied selection criteria, some explanation is prepared as below.