Using break quantities for tactical optimisation in multi-stage distribution systems
- 224 Downloads
In this chapter we discuss a tactical optimisation problem that arises in a multistage distribution system where customer orders can be delivered from any stockpoint. A simple rule to allocate orders to locations is a break quantity rule, which routes large orders to higher-stage stockpoints and small orders to end-stockpoints. A so-called break quantity determines whether an order is small or large. We present a qualitative discussion on the implications of this rule for the marketing process, and a qualitative and quantitative analysis on the implications for the transportation and inventory costs. Furthermore, we present a case study for a company that implemented a break quantity rule. Finally, in the last section the main results are summarised.
KeywordsDistribution systems Inventory Transportation Marketing break quantity rule
Unable to display preview. Download preview PDF.
- Ballou, R.H. (1992): Business Logistics Management, 3rd edition. (Prentice Hall) Englewood Cliffs, NJ.Google Scholar
- Dekker, R./Frenk, J.B.G./Kleijn, M.J./Kok, A.G. de (1997): On the newsboy model with a cutoff transaction size. Technical Report 9736/A, Econometric Institute, Erasmus University Rotterdam, The Netherlands.Google Scholar
- Dekker, R./Kleijn, M.J./Kok, A.G. de (1997): The break quantity rule’s effect on inventory costs in a 1-warehouse, N-retailers distribution system, to appear in: International Journal of Production Economics.Google Scholar
- Fleischmann, В. (1997): Design of freight traffic networks, in: Advances in Distribution Logistics, P. Stähly et al (editors).Google Scholar
- Kok, A.G. de/Janssen, F.B.S.L.P. (1996): Demand management in multistage distribution chain. Technical Report 9639, Center for Economic Research, Tilburg University, The Netherlands.Google Scholar
- Nass, R./Dekker, R./Sonderen-Huisman, W. van (1997): Distribution optimization by means of break quantities: A case study, to appear in: Journal of the Operational Research Society.Google Scholar
- Silver, E.A. (1970): Some ideas related to the inventory control of items having erratic demand patterns, in: Journal of the Canadian Operations Research Society 8, 87–100.Google Scholar
- Tijms, H.C. (1984): Stochastic Models: An Algorithmic Approach. (Wiley) New York.Google Scholar
- Tüshaus, U./Wahl, C. (1997): Inventory positioning in a two-stage distribution system with servicel level constraints, in: Advances in Distribution Logistics, P. Stähly et al (editors).Google Scholar