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Reducing Fixed and Variable Costs of Distribution

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  • Robert A. Hammond

    (McKinsey & Company, Inc., New York, New York)

Abstract

This article describes a problem in which most of the warehouses in a distribution system were owned by the Company and a significant reduction in the number of warehouses was being considered. A model of the distribution system was used to determine, through a series of approximations, a system in which total costs--including the fixed costs--were minimized by eliminating the most costly warehouses and changing the locations and sizes of others. The development of the model and the interpretation of the results in terms of management action are discussed. "Management Technology", ISSN 0542-4917, was published as a separate journal from 1960 to 1964. In 1965 it was merged into Management Science.

Suggested Citation

  • Robert A. Hammond, 1963. "Reducing Fixed and Variable Costs of Distribution," Management Science, INFORMS, vol. 0(2), pages 119-127, December.
    • Handle: RePEc:inm:ormnsc:v:mt-3:y:1963:i:2:p:119-127
    DOI: 10.1287/mantech.3.2.119
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