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

Author

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  • Das, Chandrasekhar
  • Tyagi, Rajesh

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.

Suggested Citation

  • Das, Chandrasekhar & Tyagi, Rajesh, 1997. "Role of inventory and transportation costs in determining the optimal degree of centralization," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 33(3), pages 171-179, September.
    • Handle: RePEc:eee:transe:v:33:y:1997:i:3:p:171-179
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    Citations

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    Cited by:

    1. A A Syntetos & J E Boylan & S M Disney, 2009. "Forecasting for inventory planning: a 50-year review," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 60(1), pages 149-160, May.
    2. Hadar Amrani & Eugene Khmelnitsky, 2017. "Optimal division of inventory between depot and bases," Naval Research Logistics (NRL), John Wiley & Sons, vol. 64(1), pages 3-18, February.
    3. Mosca, Alyssa & Vidyarthi, Navneet & Satir, Ahmet, 2019. "Integrated transportation – inventory models: A review," Operations Research Perspectives, Elsevier, vol. 6(C).
    4. Mohammad Ali Nasiri Khalili & Mostafa Kafaei Razavi & Morteza Kafaee Razavi, 2016. "An Optimized Mathematical Model for Items Supplies Planning of a Logistic System," Modern Applied Science, Canadian Center of Science and Education, vol. 10(10), pages 133-133, October.
    5. Kenneth Button & Elly Doyle & Roger Stough, 2000. "Intelligent transport systems in commercial fleet management: a study of short term economic benefits," Transportation Planning and Technology, Taylor & Francis Journals, vol. 24(2), pages 155-170, October.
    6. Wang, Wenbin & Yue, Shuai, 2015. "An inventory pooling model for spare units of critical systems that serve multi-companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 76(C), pages 34-44.

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