A systematic approach to substantiating the optimal location of production of goods

Abstract

The article proves that an isolated, non-systemic approach to the analysis of potential sales markets when justifying production placement may not give the right result, since the spot will not be guaranteed to be the best for placement, because even in simple situations there are many other options for targeting sales markets when justifying placement production. It determines that with a systemic approach, variants of combinations of locally optimal production sites, the total production capacity of which is equal to the general (systemic) demand, will be compared. For each attractive place of production, a locally optimal place of production is determined from the list of existing attractive places of production. The article emphasizes that locally optimal locations cannot be directly compared with each other, as their choice is determined by orientation on different potential sales markets. With three potential sales markets, there will be 5 options for combinations of locally optimal locations (1 option, which involves placing production in three spots, 1 option involving the placement of production in one spot, 3 options involving the placement of production in two spots), which form competing variants of systemically optimal spots for the placement of production. The application of the proposed systemic approach to the justification of production placement and the corresponding methodology is demonstrated on a conditional example with geographic coordinates. The systemic approach offered in the article for justifying the optimal location of the production of a single good can be adapted to a more complex or compound situation when the optimal location of the production of several goods is justified at the same time (including when one of the goods is used for the production of other goods). The most important advantage of the systemic approach is that it can be used in different branches of industry and agriculture as well.