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

  • Turkensteen, Marcel
  • Klose, Andreas
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    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.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0377221712004638
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    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 223 (2012)
    Issue (Month): 2 ()
    Pages: 499-507

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    Handle: RePEc:eee:ejores:v:223:y:2012:i:2:p:499-507
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

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    1. Frenkel Ter Hofstede & Michel Wedel & Jan-Benedict E.M. Steenkamp, 2002. "Identifying Spatial Segments in International Markets," Marketing Science, INFORMS, vol. 21(2), pages 160-177, July.
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    6. Daganzo, Carlos F. & Newell, Gordon F., 1985. "Physical distribution from a warehouse: Vehicle coverage and inventory levels," Transportation Research Part B: Methodological, Elsevier, vol. 19(5), pages 397-407, October.
    7. Turkensteen, Marcel & Sierksma, Gerard & Wieringa, Jaap E., 2011. "Balancing the fit and logistics costs of market segmentations," European Journal of Operational Research, Elsevier, vol. 213(1), pages 340-348, August.
    8. Fleischmann, Bernhard, 1993. "Designing distribution systems with transport economies of scale," European Journal of Operational Research, Elsevier, vol. 70(1), pages 31-42, October.
    9. Baita, Flavio & Ukovich, Walter & Pesenti, Raffaele & Favaretto, Daniela, 1998. "Dynamic routing-and-inventory problems: a review," Transportation Research Part A: Policy and Practice, Elsevier, vol. 32(8), pages 585-598, November.
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    13. repec:cor:louvrp:-1458 is not listed on IDEAS
    14. Nagy, Gabor & Salhi, Said, 2007. "Location-routing: Issues, models and methods," European Journal of Operational Research, Elsevier, vol. 177(2), pages 649-672, March.
    15. Michael Brusco & Douglas Steinley, 2007. "A Comparison of Heuristic Procedures for Minimum Within-Cluster Sums of Squares Partitioning," Psychometrika, Springer, vol. 72(4), pages 583-600, December.
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