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Mixups in the Warehouse: Centralized and Decentralized Multi‐Plant Firms
Author(s) -
Hunnicutt Lynn
Publication year - 2001
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/39.4.537
Subject(s) - decentralization , quality (philosophy) , industrial organization , standardization , decision maker , microeconomics , business , overhead (engineering) , economics , operations research , computer science , risk analysis (engineering) , management science , engineering , philosophy , epistemology , market economy , operating system
Single‐plant firms choose quantity/quality levels to maximize profits. Multi‐plant firms face this decision and must also choose how many decision makers to have. This article presents two case studies and a model of a multi‐plant firm in which overhead costs are lower with one decision maker (centralization), but the mass of information and the need for timely decisions make occasional mixups unavoidable. Multiple decision makers (decentralization) solves the mixup problem. Standardization—treating different outlets similarly in response to costly mixups—appears in the case studies, and is demonstrated as a result in the model.