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Demand dispersion and logistics costs in one-to-many distribution systems

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  • Turkensteen, Marcel
  • Klose, Andreas

Abstract

When an organization decides on which groups of consumers it should target, the locations of these target consumers often play a role. Methods from the field of market segmentation are able to identify target groups with high benefit levels, but the expected costs of supplying products to the target groups are less well understood. These costs can play a large role if the locations of the customers, the demand locations, are geographically widely dispersed. This paper focuses on one-to-many distribution systems in which a central facility serves all demand points. We derive accurate logistics cost estimates from the dispersion of demand points for such systems, enabling a comparison of the expected logistics costs of different candidate target groups. The most accurate measure combines the average distance from the demand locations to a central location and the mutual distances between neighboring demand locations. The average of the distances between all pairs of locations forms a good alternative measure.

Suggested Citation

  • Turkensteen, Marcel & Klose, Andreas, 2012. "Demand dispersion and logistics costs in one-to-many distribution systems," European Journal of Operational Research, Elsevier, vol. 223(2), pages 499-507.
  • Handle: RePEc:eee:ejores:v:223:y:2012:i:2:p:499-507
    DOI: 10.1016/j.ejor.2012.06.008
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Larsen, Christian & Turkensteen, Marcel, 2014. "A vendor managed inventory model using continuous approximations for route length estimates and Markov chain modeling for cost estimates," International Journal of Production Economics, Elsevier, vol. 157(C), pages 120-132.
    2. repec:eee:transb:v:107:y:2018:i:c:p:229-252 is not listed on IDEAS
    3. Ellegood, William A. & Campbell, James F. & North, Jeremy, 2015. "Continuous approximation models for mixed load school bus routing," Transportation Research Part B: Methodological, Elsevier, vol. 77(C), pages 182-198.
    4. Gahm, Christian & Brabänder, Christian & Tuma, Axel, 2017. "Vehicle routing with private fleet, multiple common carriers offering volume discounts, and rental options," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 97(C), pages 192-216.
    5. Subiza, Begoña & Silva-Reus, José A. & Peris, Josep E., 2015. "Cost sharing solutions defined by non-negative eigenvectors," European Journal of Operational Research, Elsevier, vol. 244(2), pages 592-600.

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