Site Selection Using Hybrid Analytical Hierarchy Processing: Evidence from Taiwanese Electronics Assembly Firms in China

An upswing in labor costs and currency appreciation during the 1980s caused Asian countries and economic entities such as Hong Kong, Japan, and Taiwan to search for new manufacturing sites to obtain lower manufacturing costs. China, with its huge, rapidly growing market, was one of the main options for these Asian economic dynamos. How to find an appropriate method to evaluate an optimum place for a factory setup in China is essential to an enterprise. Analytical hierarchy processing (AHP) is a method to solve complex multicriteria decision problems. However, to make decisions based only on AHP results is not sufficiently reliable, especially when the results are too close to be precisely determined. To strengthen AHP analysis, we propose a “hybrid AHP” method. This method computes an error band (EB) of final AHP scores using its 95% Confidence Interval to estimate AHP score error and calculates EB combined with a “bootstrap” to mitigate expert pectoral bias. Based on our methods, our decision rule is “maximized AHP score and minimized EB.” To verify our methods, we took Taiwanese electronic assembly manufacturers selecting manufacturing sites in China as a case study. Our research found that Eastern China has a relatively higher consensus of preference for establishing their manufacturing sites.