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INVENTORY CONSIDERATIONS IN NETWORK DESIGN
Author(s) -
Croxton Keely L.,
Zinn Walter
Publication year - 2005
Publication title -
journal of business logistics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.611
H-Index - 79
eISSN - 2158-1592
pISSN - 0735-3766
DOI - 10.1002/j.2158-1592.2005.tb00197.x
Subject(s) - inventory management , computer science , function (biology) , operations research , process (computing) , network planning and design , inventory theory , cornerstone , warehouse , operations management , fixed cost , business , marketing , economics , mathematics , art , computer network , accounting , evolutionary biology , visual arts , biology , operating system
Network design is a cornerstone of logistics management. It is traditionally used to determine the number and location of warehouses that optimize the joint transportation and fixed warehousing cost. We propose a network design model that enables managers to include inventory cost simultaneously with transportation and fixed warehouse cost in the optimization process. The proposed model treats inventory cost as a discrete function of the number of warehouses. The research also includes an illustration of the application of the proposed model using data obtained from a national retailer based in the Midwest. Results show that savings can be substantial and that the proposed model might also be used to define different configurations for C items than for A and B items.