Skip to main content
Log in

An analysis of warehouse and distribution strategies

A case study

  • Case Studies
  • Published:
Operations-Research-Spektrum Aims and scope Submit manuscript

Abstract

We consider a case where seven retailers, all belonging to the same organization, order independently from the manufacturer. The organization wants to evaluate the advantage of creating a centralized warehouse facility. However, the investment costs for such a warehouse are considerable and the organization is thus cautious that any cost savings must outweigh the investment cost. The multi-echelon inventory control literature does not indicate when a centralized warehouse is clearly the best option. However, there is evidence that a centralized warehouse may be advantageous for low demand items which are expensive, as opposed to inexpensive fast moving items. Also the costs of the additional warehouse (i.e., capital investment and operating costs) play an important role. Hence, whether or not a warehouse can reduce overall cost depends heavily on the additional cost of the centralized warehouse. In order to keep the investment cost low we consider an alternative to the centralized warehouse, called virtual centralized warehousing. In the latter system no additional investment costs are necessary (i.e., the existing retailers have excess capacity at their current facilities) and the benefits of central warehousing are achieved.

Zusammenfassung

Die vorliegende Fallstudie beinhaltet ein stochastisches Lagerhaltungsproblem für ein System mit sieben unabhängig agierenden Vertriebslägern für Ersatzteile. Neben einer Optimierung der Lagerdispositionsregeln für das bestehende, einstufige System soll die Frage der Vorteilhaftigkeit einer Errichtung eines Distributionssystems mit einem zusätzlichen Zentrallager geklärt werden, wie sie vielfach in der Literatur für Fälle sporadischer Nachfrage und hochwertiger Güter empfohlen wird. Als dritte Alternative analysiert der Beitrag das Konzept sogenannter virtueller Zentralläger, bei dem jedes der Vertriebsläger die Aufgabe eines Zentrallagers für ein oder mehrere Produkte übernimmt. Für das betrachtete Unternehmen erweist sich die Errichtung eines Zentrallagers gegenüber der unabhängigen Disposition der Vertriebsläger in bezug auf die laufenden Kosten für Beschaffung, Transport und Lagerhaltung als unvorteilhaft, während ein System mit virtuellen Zentrallägern unter denselben Kostengesichtspunkten die beste Alternative darstellt.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Similar content being viewed by others

References

  1. Ehrhardt R (1979) The Power Approximation for Computing (s, S) Inventory Policies. Manag Sci 25(8): 777–786

    Google Scholar 

  2. Ehrhardt R, Mossier C (1984) A Revision of the Power Approximation for Computing (s, S) Policies. Manag Sci 30(5): 619–622

    Google Scholar 

  3. Ehrhardt R, Schultz C, Wagner H (1981) (s, S) Policies for a Wholesale Inventory System. In: Schwarz L (ed) Multi-Level Production/Inventory Control Systems: Theory and Practice. TIMS Studies in the Management Sciences, 16, North-Holland Publishing Company, Amsterdam, pp 145–161

    Google Scholar 

  4. Schneider H, Rinks D, Kelle P (1995) Power Approximations for a Two-Echelon Inventory System Using Service Levels. Prod Oper Manag 4(4): 381–400

    Google Scholar 

  5. Schneider H, Ringuest J (1990) Power Approximation for Computing (s, S) Policies using Service Level. Manag Sci 36(7): 822–834

    Google Scholar 

  6. Schwarz L (1989) A Model for Assessing the Value of Warehouse Risk-Pooling: Risk-Pooling Over Outside Supplier Lead Times. Manag Sci 35(7): 828–842

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Rights and permissions

Reprints and permissions

About this article

Cite this article

Schneider, H., Watson, E. An analysis of warehouse and distribution strategies. OR Spektrum 19, 169–175 (1997). https://doi.org/10.1007/BF01545520

Download citation

  • Received:

  • Accepted:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF01545520

Key words

Schlüsselwörter

Navigation