Introduction

In 2020, more than half of the population in the UK shifted to online shopping, in specific
sports goods and clothes. (Daniela Coppola, (Sep 22,
2021)https://www.statista.com/statistics/275973/types-of-goods-purchased-online-in-
great-britain/). Efficient ware housing or storage facility is one of the core factors which
attributes to the successful operation of a supply chain industry. In this short report, we
discuss about Analytic Hierarchy Process (AHP) for the selection of a warehouse from where
a large supermarket chain company would like to operate its Online clothing store alone.
AHP can be described as the method to help the decision makers to find the best one after
analyzing their requirements. Also, if complex decisions are to be made AHP is the best way
since it uses a structured method. ( Vijayvargiya, A. & Dey, A.K. 2010, "An analytical
approach for selection of a logistics provider", Management decision, vol. 48, no. 3, pp. 403-
418).

AHP Process:
Analytical Hierarchy Process is a significant process used for complex decision making and
was developed first by (Saaty, 1980). In AHP all the decision making processes are tumbled
down to criteria and sub criteria which can be compared with each other, helping the
organization to finalize on the best alternative (Pearson, 2001) ( Schoenherr, T., Rao Tummala,
V.M. & Harrison, T.P. 2008, "Assessing supply chain risks with the analytic hierarchy process:
Providing decision support for the offshoring decision by a US manufacturing company", Journal of
purchasing and supply management, vol. 14, no. 2, pp. 100-111). AHP uses the following four
steps (Saaty, 1980)
1. Build the decision hierarchy; the decision is divided into its independent elements.
2. Analyse the related importance of criteria and sub criteria.
3. Alternatives are measured as per the process.
4. Inspect stability of the measurement.
(Schoenherr, T., Rao Tummala, V.M. & Harrison, T.P. 2008, "Assessing supply chain risks with
the analytic hierarchy process: Providing decision support for the offshoring decision by a US
manufacturing company", Journal of purchasing and supply management, vol. 14, no. 2, pp.
100-111). AHP uses the following four steps (Saaty, 1980)

Based on the above-mentioned process I have selected some criteria and sub-criteria for
identifying a warehouse for a large super market chain for its online clothing store which
shows in fig 1.
Selection Criteria

1. Leasing of Warehouse
The fig 1. Shows the criteria and sub criteria selected to carryout the AHP process to lease a
perfect warehouse for the company. AHP process is carried out by providing weightage to
each criterion. Once the company have the alternatives, this weightage is applied on each
criterion and sub criterion for each alternative. The one with maximum weightage
calculated using mathematical analysis can be selected.

a.1. Location
Location always plays a major role in selecting the warehouse which is why it is one of the
three main criteria. By selecting the appropriate location, the company should benefit from
reduced time and effort for streamlining its operations, in effect increase the ability to serve
more customers.” Proximity to suppliers, producers, and the market(s) being served as well as local
environmental factors must be also considered.”( https://articles.cyzerg.com/choosing-a-
warehouse-location-7-critical-criteria-to-consider). Lead time can be reduced by using the
above-mentioned idea in identifying the location of the warehouse. The three sub criteria
that come under location has been described below.
a.1.1 Logistics
Easy access to the serving regions as well as the suppliers should be considered while
selecting the location. Logistics department handles one of the key areas in a supply chain.
While identifying the location, the company should perform a detailed analysis in the below
mentioned points.
1. Accessibility to Suppliers and customers.
2. Designated space for loading and unloading area.
3. Traffic volume towards customer.

a.1.2 Option for Expansion

Since online retail business is in a steady path upwards especially in clothing sector there
should be space for expansion always. So, while identifying the location of the warehouse
the thought process should be a long-term plan where the company should have resources
or ideas to expand the storage facility. This doesn’t always mean that there must be a
vacant land near the existing warehouse to build on. It can be done by increasing the racking
facility or by building a mezzanine floor which will give extra space in the future.
a.1.3 Government Regulations
Warehousing handles a lot of processes that can result in various accidents involving the
employees or the goods. To avoid these kinds of incidents government has some regulations
in terms of Safety, Health and Environmental issues. The company should make sure that
the identified warehouse follows these regulations.

1.2 Cost
Operational expenses or cost should be considered as one of the important criteria while
identifying the warehouse. Availability and costs of equipment required for use within the
warehouse like forklift or pallet trucks should be considered. Insurance premium can vary a
lot depending upon the facility and area. The three sub criteria of costs we need to assess in
this AHP process are Rental costs, Labor costs and Utilities expense.
1.2.1 Rental Cost
The rate the company should pay to the landlord per square foot for the identified
warehouse is considered as the rental costs. It can vary depending on the location,
accessibility to highways or seaport, available infrastructure etc. While analyzing the
weightage of alternatives rental cost could have a major impact on the decision making
since it should come within the budget of the company.
 1.2.2 Labor Cost
While identifying the location, availability, and cost of labor within that area should be
studied and reported. The wages and benefits which must be given to the employees will
come under direct labor cost whereas the factors like the amount of training to be given and
the transportation cost involved in bringing them to the warehouse should be considered as
indirect labor costs. So, while identifying the alternatives a detailed study of the population
around the area should be carried out and must analyze the skills those have.

1.2.3 Utilities
Availability and costs of utilities should be thoroughly checked among the alternatives
selected before finalizing on the warehouse. Common utilities like Electricity, HVAC,
Internet, telephone should be considered. Also, some properties will have common area
maintenance costs which should be paid by the tenant.

1.3 Area
Before finding out the alternatives company should do proper research and analysis of the
built-up area and the common area required for the warehouse. Accordingly, the
alternatives should be selected within a maximum tolerance level of the require area. Area
is normally mentioned by square foot in the UK. While calculating the area required for the
operations, the company must make sure to utilize the total area in optimum level as each
square feet of area saved will be added to the profit of the organization.