Centralized vs. individual ordering in multilocation inventory systems

Document Type

Conference Proceeding

Publication Date

1-1-1998

Abstract

We consider a multiple retailer distribution system. The system consists of N stores that each carry replacement parts for a major industrial and agricultural equipment manufacturer. This distribution configuration is considered a typical 1-echelon inventory system. Demands at the stores are assumed to be independent and identically distributed. This paper discusses a comparative study of the centralized versus decentralized ordering policy for the multi-location inventory system. We find that the ordering cost alone determines the system's performance. The critical value for the centralized ordering set up cost Kc is equal to N*Ki. These results are valid for the case where no risk pooling effect is considered (zero lead time).

Publication Source (Journal or Book title)

Proceedings Annual Meeting of the Decision Sciences Institute

First Page

1486

Last Page

1488

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