Cost allocation in continuous‐review inventory models

Bruce C. Hartman and Moshe Dror

Naval Research Logistics (NRL), 1996, vol. 43, issue 4, 549-561

Abstract: 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. © 1996 John Wiley & Sons, Inc.

Date: 1996
References: View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://doi.org/10.1002/(SICI)1520-6750(199606)43:43.0.CO;2-7

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:navres:v:43:y:1996:i:4:p:549-561

Access Statistics for this article

More articles in Naval Research Logistics (NRL) from John Wiley & Sons
Bibliographic data for series maintained by Wiley Content Delivery ().