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Using break quantities for tactical optimisation in multistage distribution systems

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  • Kleijn, M.J.
  • Dekker, R.

Abstract

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.

Suggested Citation

  • Kleijn, M.J. & Dekker, R., 1997. "Using break quantities for tactical optimisation in multistage distribution systems," Econometric Institute Research Papers EI 9737/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    • Handle: RePEc:ems:eureir:1404
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    1. Dekker, R. & Frenk, J.B.G. & Kleijn, M.J. & de Kok, A.G., 1997. "On the newsboy model with a cutoff transaction size," Econometric Institute Research Papers EI 9736/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. de Kok, T. & Janssen, F.B.S.L.P., 1996. "Demand management in Multi-Stage Distribution Chain," Other publications TiSEM 653616d2-e230-4bef-9566-8, Tilburg University, School of Economics and Management.
    3. Fleischmann, Bernhard, 1993. "Designing distribution systems with transport economies of scale," European Journal of Operational Research, Elsevier, vol. 70(1), pages 31-42, October.
    4. de Kok, T. & Janssen, F.B.S.L.P., 1996. "Demand management in Multi-Stage Distribution Chain," Discussion Paper 1996-39, Tilburg University, Center for Economic Research.
    5. Gary D. Eppen, 1979. "Note--Effects of Centralization on Expected Costs in a Multi-Location Newsboy Problem," Management Science, INFORMS, vol. 25(5), pages 498-501, May.
    6. V. Kasturi Rangan & Ramchandran Jaikumar, 1991. "Integrating Distribution Strategy and Tactics: A Model and an Application," Management Science, INFORMS, vol. 37(11), pages 1377-1389, November.
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    1. Dekker, R. & Frenk, J.B.G. & Kleijn, M.J. & de Kok, A.G., 1997. "On the newsboy model with a cutoff transaction size," Econometric Institute Research Papers EI 9736/A, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    2. Krever, Maarten & Wunderink, Sophia & Dekker, Rommert & Schorr, Benno, 2005. "Inventory control based on advanced probability theory, an application," European Journal of Operational Research, Elsevier, vol. 162(2), pages 342-358, April.

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