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

Subhash Ray

No 2011-04, Working papers from University of Connecticut, Department of Economics

Abstract: 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.

Keywords: Data Envelopment Analysis; Multi-plant Production; Transportation Cost (search for similar items in EconPapers)
JEL-codes: C61 D24 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2011-02
New Economics Papers: this item is included in nep-eff
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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