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Measuring Cost Efficiency in an Integrated Model of Production and Distribution: A Nonparametric Approach


  • Subhash C. Ray

    (University of Connecticut)


In production economics, little attention is paid to transportation costs in any discussion of cost minimization by the firm. When the output is produced at multiple locations, transportation costs can become quite important in light of the geographical dispersion of plants and markets. In network models within the operations research literature, on the other hand, the main interest lies in minimization of the total transportation and inventory costs and only casual attention is devoted to production costs. This paper formulates an optimization problem that minimizes the total delivered cost of the firm. A numerical example is included for illustration.

Suggested Citation

  • Subhash C. Ray, 2011. "Measuring Cost Efficiency in an Integrated Model of Production and Distribution: A Nonparametric Approach," Working papers 2011-04, University of Connecticut, Department of Economics.
  • Handle: RePEc:uct:uconnp:2011-04
    Note: An earlier version of this paper was presented at the Annual Conference of INFORMS held in November 2010 at Austin, TX and has benefited from comments received from the participants.

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    Cited by:

    1. Ray, Subhash, 2016. "Cost efficiency in an Indian bank branch network: A centralized resource allocation model," Omega, Elsevier, vol. 65(C), pages 69-81.

    More about this item


    Data Envelopment Analysis; Multi-plant Production; Transportation Cost;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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