IDEAS home Printed from https://ideas.repec.org/a/sen/rebelj/v57i3y2012p339-354.html
   My bibliography  Save this article

The Value of Multi-Echelon Models

Author

Listed:
  • P.L. Jackson
  • J.A. Muckstadt

Abstract

We present a rationale for implementing multi-echelon inventory methods by focusing on a business opportunity we call the “curse of variety.†The curse of variety phenomenon, which can be traced to fundamental economics in lot sizing and safety stock, occurs when inventory investment is disproportionately concentrated in items that are slow-moving. The curse is both a drag on efficiency and a vulnerability to market share loss to more focused suppliers. Also, when customer service targets are set at the individual product level, the result will be that each echelon within a distribution network will carry the same range of product to relatively similar levels of depth. We then change the customer service level targets in a way that honors their original intent but permits safety stock inventories to be concentrated in items and locations for greater effectiveness. The result of the change is to reduce the total safety stock investment required by making the distribution of safety stock between echelons complementary rather than duplicative. It also appears as if this change in strategy greatly mitigates the curse of variety, at least with regard to safety stock investment. The rationale is illustrated by means of a simple numerical example.

Suggested Citation

  • P.L. Jackson & J.A. Muckstadt, 2012. "The Value of Multi-Echelon Models," Review of Business and Economic Literature, Intersentia, vol. 57(3), pages 339-354, September.
  • Handle: RePEc:sen:rebelj:v:57:i:3:y:2012:p:339-354
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sen:rebelj:v:57:i:3:y:2012:p:339-354. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Petra Van den Bempt (email available below). General contact details of provider: http://www.rebel-journal.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.