Annals of Operations Research

, Volume 272, Issue 1–2, pp 389–427 | Cite as

Product costing in the strategic formation of a supply chain

  • Renato de Matta
Advances in Theoretical and Applied Combinatorial Optimization


This study presents manufacturing and distribution network models for strategic supply chain planning. Where prices of intermediate products in the supply chain are not readily available, we study the influence on the formation of the supply chain of using either direct product costing or full absorption costing for setting internal prices. We develop a generalized Benders decomposition-based approach to solve the models. Problems representing a variety of scenarios that simulates different economic environments are solved. Our computational results show that the product costing method could influence the concentration of production activities at potential manufacturing locations, production and shipment quantities, product prices, and allocation of profits in the supply chain.


Decision support models Supply chain management Pricing Supply disruption Operations management Capacity planning 



I would like to thank Tan Miller for his insights and also for the industry data without which this study would not have been possible. This study has been supported by the Lary and Lori Wright Research Fellowship.


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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.Department of Management SciencesUniversity of IowaIowa CityUSA

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