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Note—Effects of Centralization on Expected Costs in a Multi-Location Newsboy Problem
Abstract
This paper concerns a multilocation newsboy problem with normal demand at each location and identical linear holding and penalty cost functions at each location. Consolidation of demand from several facilities is considered, and an expression is derived for the resulting expected holding and penalty costs as a function of the demand parameters for each location (means, variances, and correlation coefficients). The expression is used to demonstrate that (i) the expected holding and penalty costs in a decentralized system exceed those in a centralized system; (ii) the magnitude of the saving depends on the correlation of demands; and (iii) if demands are identical and uncorrelated, the costs increase as the square root of the number of consolidated demands.
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Cited by
OR/MS models for supply chain disruptions: a review
Snyder, L. V., Atan, Z., Peng, P., Rong, Y., Schmitt, A. J., & Sinsoysal, B. (2016) · IIE Transactions · doi:10.1080/0740817x.2015.1067735 · Cited by 854
Fisher Ke, J.-Y., Otto, J., & Han, C. (2022) · Journal of Business Research · doi:10.1016/j.jbusres.2022.04.066 · Cited by 37
Metadata
- Authors
- Eppen, G. D.
- Venue
- Management Science
- Published
- 1979-05
- Volume
- 25
- Issue
- 5
- Pages
- 498-501
- ISSN
- 0025-1909 (ISSN-L)
- 1526-5501
- OpenAlex
- W2143499340
- Cited by
- 667
- References
- 0
- FWCI
- 2.24
- Type
- journal article
- Language
- en
- Open access
- closed
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- Eppen, G. D. (1979). Note—Effects of Centralization on Expected Costs in a Multi-Location Newsboy Problem. Management Science. https://doi.org/10.1287/mnsc.25.5.498
Data sources
Bibliographic data: Semantic Scholar, OpenAlex, Crossref.
Contains information from the Semantic Scholar Academic Graph Datasets, made available under the ODC Attribution License (ODC-BY 1.0).
Semantic Scholar’s data is described in: Kinney, R., et al. (2023). The Semantic Scholar Open Data Platform. arXiv:2301.10140.
