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On the effect of centralisation on expected profits in a multi-location Newsboy problem

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  • M Cherikh

    (Virginia State University)

Abstract

This paper is a multi-location, single-period, single-product inventory problem with an opportunity for centralisation. The decentralised model in which a separate inventory is kept at every location is compared to the centralised system in which the demands are satisfied from one central warehouse. The two systems are then compared when excess demands are penalised and lost, and in the more general case where a portion or all of the excess demand at a location may be reallocated among other locations with the remaining inventory. The revenue, salvage, cost, and penalty functions at each location are assumed to be identical. Expected profits are evaluated and conditions under which the centralised model outperforms the decentralised one are derived.

Suggested Citation

  • M Cherikh, 2000. "On the effect of centralisation on expected profits in a multi-location Newsboy problem," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(6), pages 755-761, June.
    • Handle: RePEc:pal:jorsoc:v:51:y:2000:i:6:d:10.1057_palgrave.jors.2600955
    DOI: 10.1057/palgrave.jors.2600955
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    Citations

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    Cited by:

    1. Abu Hashan Md Mashud & Hui-Ming Wee & Chiao-Ven Huang & Jei-Zheng Wu, 2020. "Optimal Replenishment Policy for Deteriorating Products in a Newsboy Problem with Multiple Just-in-Time Deliveries," Mathematics, MDPI, vol. 8(11), pages 1-18, November.
    2. Rung-Hung Su & Chia-Ding Hou & Jou-Yu Lee, 2024. "Obtaining Conservative Estimates of Integrated Profitability for a Single-Period Product in an Own-Branding-and-Manufacturing Enterprise with Multiple Owned Channels," Mathematics, MDPI, vol. 12(13), pages 1-22, July.
    3. Ahmed Saif & Samir Elhedhli, 2019. "Sterilization network design," EURO Journal on Transportation and Logistics, Springer;EURO - The Association of European Operational Research Societies, vol. 8(1), pages 91-115, March.
    4. Xiao, Li & Wang, Ce, 2023. "Multi-location newsvendor problem with random yield: Centralization versus decentralization," Omega, Elsevier, vol. 116(C).
    5. Navneet Vidyarthi & Emre Çelebi & Samir Elhedhli & Elizabeth Jewkes, 2007. "Integrated Production-Inventory-Distribution System Design with Risk Pooling: Model Formulation and Heuristic Solution," Transportation Science, INFORMS, vol. 41(3), pages 392-408, August.
    6. Refik Güllü & Geert-Jan van Houtum & F. Zeynep Sargut & Nesim Erkip, 2005. "Analysis of a Decentralized Supply Chain Under Partial Cooperation," Manufacturing & Service Operations Management, INFORMS, vol. 7(3), pages 229-247, March.

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