Role of inventory and transportation costs in determining the optimal degree of centralization

doi:10.1016/S1366-5545(97)00019-7

Transportation Research Part E: Logistics and Transportation Review

Volume 33, Issue 3, September 1997, Pages 171-179

https://doi.org/10.1016/S1366-5545(97)00019-7 Get rights and content

Abstract

This paper presents a formal analysis of the inventory centralization decision in a wider perspective. Expressions for various elements of total system cost are developed and their individual and combined effects on centralization are analyzed using an optimization model. The major thrust of the paper is on determining the optimal degree of centralization as a tradeoff between inventory and transportation costs. It considers five scenarios each representing a different role of inventory and transportation in the total supply system. Examples of how each scenario may arise in practice are given and the best degrees of centralization for the scenarios are compared and illustrated with secondary data.

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Role of inventory and transportation costs in determining the optimal degree of centralization

Abstract

Journal of Operations Management

International Journal of Production Economics

Logistical Management

Decision Rules for Inventory Management

On the effect of centralization on expected costs in a multi-location newsboy problem

Journal of the Operational Research Society

Effects of centralization on expected costs in a multi-location newsboy problem

Journal of the Operational Research Society

An example of disbenefits of centralized stocking

Journal of the Operational Research Society

A reappraisal of the square root law

International Journal of Physical Distribution and Materials Management

Supply and redistribution rules for two-location inventory systems: one-period analysis

Management Science

Effect of centralization on expected costs in a multi-location newsboy problem

Management Science

Expanding the square root law: an analysis of both safety and stocks

Logistics and Transportation Review

The portfolio effect and multiple consolidation points: a critical assessment of the square root law

Journal of Business Logistics

Business Logistics

Analysis of a two-echelon inventory control system with complete redistribution

Management Science