1975. Centralized and Decentralized Inventory Stocking, Transshipment and Transportaiton
Invited abstract in session TA-30: Production and Transportation, stream Advanced Lot Sizing and Inventory Strategies .
Tuesday, 8:30-10:00Room: Maurice Keyworth 1.05
Authors (first author is the speaker)
| 1. | Anand Paul
|
| University of Florida |
Abstract
We make a detailed analytical cost comparison between centralized and decentralized inventory stocking policies in a region with stochastic aggregate demand, divided into a finite number of demand centres. Each demand centre has a demand that is a random fraction of the aggregate demand. In the decentralized model, each demand centre is served by a warehouse whereas in the centralized model there is only one warehouse that serves all the demand centres. We study the difference in the expected cost in the centralized and decentralized models, both with and without transshipment of inventory between demand centres, and study how the cost difference scales with the number of demand centres. Finally we make an analytical study of the tradeoff between inventory and transportation costs, and show that transportation costs tend to increase in proportion to the square root of the number of demand centres.
Keywords
- Inventory
- Stochastic Models
- Transportation
Status: accepted
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