TY - JOUR
T1 - Cost allocation in continuous-review inventory models
AU - Hartman, Bruce C.
AU - Dror, Moshe
PY - 1996/6
Y1 - 1996/6
N2 - A centralized inventory system serves a number of stores with common ownership, and thus reliable and timely information sharing. Each of them pays a share of the inventory cost, and the reward structure leaves the owners of individual stores rewarded for their individual performance. Appropriate selection of a cost allocation method is important if such a centralized system is to last. In this work we propose three necessary criteria - stability (core of a related cooperative game), justifiability (consistency of benefits with costs), and polynomial computability. For a concrete example we demonstrate that common allocation procedures may not meet all three tests, and we present a method that that meets all three criteria. This kind of cost allocation analysis helps the common management to evaluate the trade-offs in choosing an allocation scheme for the cost of inventory centralization.
AB - A centralized inventory system serves a number of stores with common ownership, and thus reliable and timely information sharing. Each of them pays a share of the inventory cost, and the reward structure leaves the owners of individual stores rewarded for their individual performance. Appropriate selection of a cost allocation method is important if such a centralized system is to last. In this work we propose three necessary criteria - stability (core of a related cooperative game), justifiability (consistency of benefits with costs), and polynomial computability. For a concrete example we demonstrate that common allocation procedures may not meet all three tests, and we present a method that that meets all three criteria. This kind of cost allocation analysis helps the common management to evaluate the trade-offs in choosing an allocation scheme for the cost of inventory centralization.
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U2 - 10.1002/(SICI)1520-6750(199606)43:4<549::AID-NAV7>3.0.CO;2-7
DO - 10.1002/(SICI)1520-6750(199606)43:4<549::AID-NAV7>3.0.CO;2-7
M3 - Article
AN - SCOPUS:0030174452
SN - 0894-069X
VL - 43
SP - 549
EP - 561
JO - Naval Research Logistics Quarterly
JF - Naval Research Logistics Quarterly
IS - 4
ER -