The expansion decisions of cassava buying location with buying price decisions case study: Cassava processing manufacturers

This research aims to establish guidelines for selecting position of cassava buying location and assign the appropriate purchase price to cassava purchaser. Nowadays, the quantities of cassava, which facilities obtain, are lower than their production capacity due to high competition among cassava processing manufacturers. Cassava processing factories need to obtain more quantity of raw materials, which are required to expand cassava buying locations to obtain raw materials from other areas where agriculturists have never sold their products to the factory. After the appropriate locations have been established, purchasing prices are calculated in order to compete the price with competitor in such area. The solution methodology is divided into 2 parts such that location selection problem is formulated as Mixed integer linear programming (MIP) model and price competition model is used to calculate the purchasing price. The case study of one firm with two competitors, fifteen possible expansion sites, and fifteen agricultural areas is considered. The results from numerical example indicate that the factory expands 2 cassava buying locations which cover 10 harvesting areas and obtained 45,232 tons of cassava at the purchase price of $55.66 per ton with optimal profit of $2,265,758.73.