Risk Evaluation and Decision Modelling in Logistics Projects Using a Software Tool

Abstract

The decision of optimum location in the construction of a logistics (warehouse & distribution) center (or similar facilities) is frequently encountered in the business environment. On a purely logistical level (assuming minimal internal political considerations), this decision must take into account the uncertainties in the calculation of the transportation costs from the central location to peripheral (satellite) stores, the operating costs, the required capital investment and the cost of transportation subject to gas price fluctuations. This article addresses the above questions using an adequate software tool, and provides the methodological framework for the modelling of such business decisions; furthermore, it demonstrates the feasibility and the reliability of the proposed approach and corroborates its findings with a realistic example.