European Journal of Social Sciences Volume 13, Number 2 (2010)

Convex Programming Approach to the Shopping Mall (AVM) Site Selection Problem and Sakarya
Habip Koak Faculty of Business Administration and Economics, Econometrics Department Marmara University, Istanbul E-mail: hkocak@marmara.edu.tr Tel: +90 212- 507 99 25 Ext. 1220 Abstract The facility location is the one of the most difficult activities for the administrator as decision-makers. Decision-makers have to evaluate many alternatives for assuming all criterions to define the best location. At the present day, rapid changes have been increased uncertainties that enterprises face with, lead into management wilderness and made difficult to decision making. In this study, convex programming, a special case of nonlinear programming problems, is used for solving the shopping center location problems in Adapazar City Center, Sakarya. Keywords: Facility Location, Nonlinear Programming, Convex Programming, Shopping Center.

The retail business consists of the intermediary services which provide transport of goods between producer and consumer. The retail business includes all activities related to the marketing of goods and servies directly to the end user provided that they are not used for a commercial purpose or resold, but used for personal and family needs (Tek,1997). Among the retail sales units, shopping malls (AVMs) play an important role in transporting produced goods and services to the end user. An AVM is defined as the aggregation of retail sales units by means of planning, developing and being administered by an ownership and central management (Kotler,2009). The emergence of the planned AVMs dates back to 50 years ago. When settlement in urban areas shifted to suburban areas, a shrinking process began for retail businesses which used to work as small, local shopping sites. In the following process, regional shopping centers emerged as AVMs were relocated in places close to the city, yet outside the city. Lowry J.R. classified planned AVMs as local AVMs, regional AVMs, factory outlets and inner-city AVMs (Timor,2004). Types of AVMs according to International Council of Shopping Centers (ICSC) are given in Table 1:

1. Introduction

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Table 1:
Format

Types of AVMs
Total usable area 80.000 m2 and more 40.000 m2 -79.999 m2 20.000 m2 -39.999 m2 5.000 m2 19.999 m2 20.000 m2 and more 10.000 m2 19.999 m2 5.000 m2 9.999 m2 5.000 m2 and more 5.000 m2 and more 5.000 m2 and more

Project type Very big Big Traditional Medium Small (specialized) Retail park Big Medium Small Featured Outlet Themed (amusement-oriented) Centre (non-amusement oriented) Source: http://www.ampd.org/members/files/avm_standartlari.pdf

The retail business has been gaining new dimensions nowadays, while the shares of big malls in retail trade is increasing. At the end of 2008, AVMs were the fourth biggest industry in Turkey with its 175 billion USD sales figure. The industry has set its target for 2010 as 200 billion USDs. Turkey is the 7th largest market in Europe and 10th in the world in retail business (AMPD, 2009). As of April 2009, there were 223 active AVMs and 126 under construction; thus, the number of AVMs will reach at 349 in 2010. The total rentable area has reached at 4.599.163 m2 (NIELSEN, 2008). Turkey ranks first in Europe in per capita rentable area with 215 m2.

2. Literature Rewiew

In the literature, Mall and Facility Selection Problem, which is a subject of operations search and decision-making process, occupies an important place. Reilly and Converses studies have been guiding in this area. In his first-attraction model, Reilly modeled inter-city shopping-oriented movements taking into consideration population and distance (Reilly, 1929). Huff thought that this model was incomplete and developed a more fundamental model taking into account customer preferences (Huff, 1964). Huff developed this model assuming that shopping mall preferences of customers depended on attractiveness of the mall and distance between customer and the mall. Christaller and Lsch were the first to model spatial behavior of the trade. In their study, they defined the relation between single-purpose travels of consumers to the closest mall, size of the retail area and the distance travelled to reach that place (Washington, 2008). In Christians Central Place Theory, combination of the target and the edge creates a hexagonal market area, in which hexagonal beehives define the size of the market areas. In figure 1, beehives represent market areas, small blue circles inside the hexagon define small settlements, green circles define the outmost centers cities and the red circle in the middle shows unified cities.

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Figure 1: Christaller Lschs Hexagonal market Area Model [Voigt, Online, ]

When recent studies are examined, it can be seen that especially facility site selection and routing problems have been increasing. Serra and Colome developed a p median optimization model in which demand is maximized based on the assumption that the customer demand share depends on the attractiveness and the distance (Serra et.al, 2001). In another study, Drezner et al. modeled a facility place selection problem where the deviation of the market share of the firm from a critical value as an ends-function is minimized (Drezner, 2001). In another study, Okunaki and Okaba developed a model and algorithm which solves the problem with a transport network similar to Huffs model (Okunaki, 2002). In shopping mall site selection problems, models which claim that customers would not always go to the mall that is closest to them, but base their preferences on the attractiveness of the mall and their own needs are the most discussed topics nowadays. Da and Laporte presented a model in whch customers prefer malls with certain probabilities taking into account distance, type of service and the consumption characteristics (Dasc, 2005). Fernandez developed a model which maximizes profit for both the parent company and the dealer for electing a single facility site (Fernandez, 2006). Another dimension of the studies in this area is solving simultaneously the facility site selection problem and the routing problem. Nagy and Sahlis study was published in 2007 which scanned and summarized such studies and models they developed (Nagy, 2007). One of the current studies in which mall selection problem was handled alone is made by Aboolian and colleagues. In this study, negative customer attractions (cannibalizations) of malls of a certain chain and their competitor malls were examined using Huffs model (Aboolian, 2007). Examination of AVMs in Turkey has attracted the attention of researchers from several disciplines, mostly urban planners and operation researchers. The place of AVMs in urban transformations (Demirciolu, 2004), the determination of customer profile (Erkip, 2005), the site selection analysis (ESRI, 2007) are the areas in which most studies are published. With the help of developments especially in geographical information technologies, decision support systems have been devised for mall site selection problems. In his/her study, Bayar conducted a spatial analysis using data obtained from customer behaviors report, and determined a suitable place for the AVM which would be founded in Ankara (Bayar, 2005). In the model they developed, Bozkaya and Yank recommended solutions using a CBS based decision-support system by means of determining current locations of a chain of malls, places of competitor malls, and potential sites for opening new malls (Bozkaya et.al, 2008). In his/her study, Timor applied Analytical Hierarchy Process for site selection for the shopping mall (Timor, 2004). Yenen et al. also examined site selection criteria in retail industry with Analytical Hierarchy process (Yenen et.al.,2006). 221

European Journal of Social Sciences Volume 13, Number 2 (2010) The area which is the most suitable for site selection problems in logistics industry is warehouse area selection problems. Firms usually materialize warehouse selection section among logistics systems by means of the minimum transport period and the distance, the minimum storage need and the minimum distribution frequency, which are the cost and profit-based network problems affected by the numerical limitations in practice. Ho and Perl developed a Service-Sensitive Warehouse Preference (SSWP) model by establishing restrictions, demanded product, product accessibility and order cycle time so as to maximize total profit (Ho et.al., 1995). For warehouse network assessment and design, models that join analytical hierarchy process and complex are integrated linear programming (Korpela et. al.). Ambrisono claimed that logistic management components cannot be optimized in the total and suggested an integer-programming model for the simultaneous solution of location, transportation, distribution and storage problems (Ambrosino et.al.,2005). There are optimization models related to the selection among alternative warehouse places and their opening with the help of Mixed Integer problems which take into account capacity restriction that ensure the demand is met and costs are minimized, as well as time (Baker, et.al, 1999). However, the purpose of this type of models has been improving logistic activities on existing network rather than geographical determination of location sites. When the purpose is determining a geographical location, there emerged the necessity of the data included in 2-dimension coordinate system, in which case it is recommended to develop a model defined in Euclid Space; for solving the model, convex programming is suggested (Can, et.al., 2006).

3. Convex Programming
Convex programming is a special case of non-linear programming (DOP) (Bal, 1992). f (X) and
g i (X) functions being continuous and differentiatable, the most general pattern of DOP is as follows:

Min f (X)

X = (x1 , x 2 ,..., x n )

(1) gi = b j i = 1, 2,..., m , j = 1, 2,..., m where f (X) is defined as an end-function, and X = (x1 , x 2 ,..., x n ) are defined as decision variables. In real-life problems, they get positive values. The problem defines X = (x1 , x 2 ,..., x n ) decision variables which optimize f (X) . If f (X) and g i (X) functions are linear here, the problem becomes a Linear Programming Problem. In the problem defines as (1), if m=0, the problem is named as unrestricted DOP and calculated by means of the following methods (Bal, 1992):
Table 2:
1. 2. 3.

Non-restricted Multi-Variable Optimization Methods

Gradient methods Fastest Increase Method Fastest Decrease Method Newton Method Conjugate Gradient Method Variant Metric Method

4. 5.

Direct searching methods Random Searching Method Single-variable Searching Method Model Searching Method 3.1. Powwel Method 3.2. Hooke-Jeeves Method Simplex Method Rosendrock Coordinate Conversion Method

1 2 3 4 5

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If there are restrictions and equality, Lagrange coefficients method is used. Lagrange coefficients use the following algorithm for optimization problems whose restrictions are not equal (Ruszcynski, 2006). a) ignoring inequality restrictions, optimal solution for only f (X) , X = (x1 , x 2 ,..., x n ) endfunction is sought. b) it is checked whether the calculated absolute solution provides g i 0 i = 1, 2,..., m restrictions. If it does, the calculated solution is an absolute minimum, and X * has to 0 provide all restrictions. c) if one or more restrictions are not provided, any restriction, for example 1km is chosen from the model and included into the model with the equation mark, Min f (X)
g k (X) = 0
* 1

(2)

thus, the problem is solved. If there is a solution for this problem X is obtained. * d) it is checked whether X 1 provides all restrictions. If it does, this is a minimum solution. If not, another restriction, for example kl, 1 l m is chosen as 1st restriction and included into the model, which solves the problem. Min f (X) g k (X) = 0 (3) g l (X) = 0 e) If an absolute minimum cannot be obtained in d above, two restrictions are included into the problem with the inequality marks d solution is found. When a solution is found which provides all restrictions, the optimum solution is obtained. The process continues until it is done. In order to find the solution of an optimization problem with the inequality restrictions, KarushKuhn-Tucker conditions, which is a more developed technique, is employed (Hiller et.al., 1995) Karush-Kuhn-Tucker conditions have to be provided, but this is not enough. The end-function and the restriction-functions have to be convex so that conditions can be sufficient. In maximization problems, on the other hand, concavity of the end-function and convexity of restriction functions is sufficient condition so that optimal solution can be found for the problem. In problem (1), if the end-function f (X) and restriction-functions g i (X) are convex, the expression (1) is titled as Convex Programming Problem (Winston, 2004), where, as g i (X) is a convex function, the cluster of points which provide g i (X) 0 restrictions is also convex (Walsh, 1975).

The purpose of this study is to determine with the help of convex programming the potential location of a high-potential AVM which is planned in the districts within Sakarya metropolitan Municipality. With 0,404 development index, Sakarya ranks 23rd among 81 provinces according to 2003 data in terms of socio-economic development (34). Urbanization is 61% and population density is 156 persons/km2. The share of the province in the gross domestic product is 1,1%; its development pace is 37,7%, and the per capita GDP in the province is 5219 $. The province has 15 districts, 10 of which are connected to the centre. In the study, districts of Sakarya metropolitan Municipality have been chosen. The region is in medium-high segmentation in economic terms, which also hosts many industrial establishments. It also has the most important automotive industrial zone of Marmara Region. 223

4. Data and Methodology

European Journal of Social Sciences Volume 13, Number 2 (2010) 4.1. The Model

The reaching accurate results and the establishing criteria in proper site selection studies are directly proportional to the data. However, the biggest problem faced is the inability to reach reliable data with the sufficient details. The most important restricting factor to this study is the reliability purenss of the data. Therefore, the study is just an experiment.
Table 3: The Socio-Economic Indicators of Sakarya Central District
District 340.825 83,25 7,25 624 137.217

Socio-Economic indicators Central Population Urbanization rate (%) Population increase rate (%) Population density (%) General budget income per capita (.1000 TLs) Source: Socio-economic development ranking research for provinces and regions (2003), DPT Publication, No:2671, http://ekutup.dpt.gov.tr/bolgesel/gosterge/2003-05.pdf

The most important issues that have to be taken into account for proper site selection for modern shopping malls (AVMs) which shall be built is the places from where the centre can attract customers. For this purpose, the population size and its socio-economic features have to be examined.
Table 4: The population and area the data of districts of Sakarya metropolitan Municipality
Population 24157 14193 74607 312861 385482 385482 422772 309880 309880 36916 12548 Alan (m2) x 6920 6458 7678 27449 63810 3830 9609 34820 137048 1612 4985 Cartesian coordinates y 26366,932 33553,655 33603,053 30040,655 44502,717 17425,493 15824,895 15729,394 18400,501 14511,765 19145,779 13976,278 18882,935 12265,059 19960,596 12622,709 21313,051 15890,347 6128,084 6335,474 30548,462 2122,386

District Item No Ferizli 1 Stl 2 Hendek 3 Serdivan 4 Adapazar 5 Adapazar 6 Arifiye 7 Erenler 8 Erenler 9 Sapanca 10 Karaprek 11 Source: TK, 2008 population data.

As can be seen from the table, some districts were used more than once, as there are more than one places suitable for AVM in those districts. The boundaries of service areas of an AVM are determined with the following formula Dab Ub = (4) F 1+ a Fb where

Ub : is the effect of AVM b, Dab : is the distance between AVM a and AVM b, Fa : is the influence area of centre a, Fb : is the influence area of centre b (Oppewal et.al., 2000)

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The competition and the distance among the AVMs. As the distance decreases, competition increases. In order to decrease competition, the area of the new AVM comparing to the other areas has to be at least 3 kms closer. Potential places for an AVM are shown in the following figure.
Figure 2: Map of potential AVM sites

Source: Sakarya Municipality, www.sakarya.bel.tr

The following parameters shall be used in the site selection model for an AVM. Mx : X coordinate of the AVM which shall be built M y : Y coordinate of the AVM which shall be built

di : total population of the districts in influence area of AVM * average per capita income ci : parcel size of candidates n : number of candidate points where d.ci shows the importance weight of each candidate point. i
The expression

(M x x i ) 2 + (M y yi )2 is the Euclid expression of each candidate district to

AVMs location. Accordingly, following model minimizes the total Euclid distance of districts suitable for AVM site selection to the potential point proportional to its weight.

[ Min ] Z = d i .ci (M x x i )
i =1

1/2 2

+ (M y y i )
2

M x 0

(5)

_ My 0 In (5) numbered concave programming problem, potential customer population in the influenced area and the average per capita income and the size of parcel area were defined as weight. In this study, Cartesian coordinates of the 9 candidate districts mentioned above were determined first and the weights related to these centers were displayed. However, in case of existence of much more detailed economic data related to these districts, they can also be added as weight. On the other hand, 225

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as the case in factor weights or in the some AHP-based solution methods, the qualitative features can also be ranked and used as the weight in the model. Optimization problem numbered (5) was solved with MS Excel Solver annex which has GRG2 algorithm. Potential AVM location found as a result of the optimization of handled model was calculated as M x = 4822,534968 , M y = 10104,8902 .
Microsoft Excel 11.0 Response Report Worksheet: [uygulama_avm.xls]avm_yersecimi Report created on: 26.01.2010 18:14:57
Cell SKS28 Name First value 5.658.111.518.374.040.000,00

Target cell (smallest)

Last value 5.658.110.991.753.410.000,00

Cell SFS35 SGS35

Name AVMx AVMy

First value 4822,534968 10104,8092

Adjustable cells

Last value 4822,535625 10104,9038

Cell Na SGS35 SGS35

me AVMx AVMy

Cell value 10104,9038 SGS35>=0 4822,535625 >=0

Restrictions

Situation Different different

Exemption 10104,9038 4822,535625

The location determined for the AVM with mathematical methods is within Serdivan district. Serdivan is a mostly residence-weighted area and its residents meet their commercial and social needs mostly from Adapazar district. The ratio of the luxury residences is high. As its geological situation is more suitable for settlement compared to other districts, planned and fast construction activities have been assumed in order to close the residence deficit after the earthquake of 1999 and 75,000 licenses have been granted since then. As defined in the strategic plan of Serdivan municipality, the purpose is to develop Serdivan as a university-oriented commercial centre. Almost 35,000 students of Sakarya university are settled in Serdivan district.

In this paper, the importance of concave programming for determination of location for the shopping mall which is planned to be built in Adapazar central district of Sakarya province have been explained in detail, and coordinates of the geographical location of the mentioned shopping mall have been found with concave programming, which is a specific case of non-linear programming. The geographical location determination with concave programming is the core of this study as the literature rewiew with site selection problems revealed studies on choosing between alternatives as regards geographical location determination.

6. Conclusion

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