On the Effect of Centralization on Expected Costs in a Multi-Location Newsboy Problem

Abstract

This paper deals with a single-period, single-product inventory model with several individual sources of demand. It is a multi-location problem with an opportunity for centralization. Two types of inventory system are considered in this paper: the decentralized system and the centralized system. The aim of this paper is to extend Eppen's model by adding the consideration of transportation cost to constitute a new inventory model. With this new inventory model we prove three theorems that include the results of Eppen's model.

Keywords:

• Facilities and Equipment Planning
• Inventory and Production–Operating Characteristics
• Inventory and Production–Stochastic Models