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- Publisher Website: 10.1016/j.omega.2014.06.002
- Scopus: eid_2-s2.0-84921279023
- WOS: WOS:000349586800018
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Article: Centralization versus decentralization: Risk pooling, risk diversification, and supply chain disruptions
Title | Centralization versus decentralization: Risk pooling, risk diversification, and supply chain disruptions |
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Authors | |
Keywords | Risk Inventory control Supply chain disruptions |
Issue Date | 2015 |
Citation | Omega (United Kingdom), 2015, v. 52, p. 201-212 How to Cite? |
Abstract | © 2014 Elsevier Ltd. We investigate optimal system design in a multi-location system in which supply is subject to disruptions. We examine the expected costs and cost variances of the system in both a centralized and a decentralized inventory system. We show that, when demand is deterministic and supply may be disrupted, using a decentralized inventory design reduces cost variance through the risk diversification effect, and therefore a decentralized inventory system is optimal. This is in contrast to the classical result that when supply is deterministic and demand is stochastic, centralization is optimal due to the risk-pooling effect. When both supply may be disrupted and demand is stochastic, we demonstrate that a risk-averse firm should typically choose a decentralized inventory system design. |
Persistent Identifier | http://hdl.handle.net/10722/296106 |
ISSN | 2023 Impact Factor: 6.7 2023 SCImago Journal Rankings: 2.647 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Schmitt, Amanda J. | - |
dc.contributor.author | Sun, Siyuan Anthony | - |
dc.contributor.author | Snyder, Lawrence V. | - |
dc.contributor.author | Shen, Zuo Jun Max | - |
dc.date.accessioned | 2021-02-11T04:52:50Z | - |
dc.date.available | 2021-02-11T04:52:50Z | - |
dc.date.issued | 2015 | - |
dc.identifier.citation | Omega (United Kingdom), 2015, v. 52, p. 201-212 | - |
dc.identifier.issn | 0305-0483 | - |
dc.identifier.uri | http://hdl.handle.net/10722/296106 | - |
dc.description.abstract | © 2014 Elsevier Ltd. We investigate optimal system design in a multi-location system in which supply is subject to disruptions. We examine the expected costs and cost variances of the system in both a centralized and a decentralized inventory system. We show that, when demand is deterministic and supply may be disrupted, using a decentralized inventory design reduces cost variance through the risk diversification effect, and therefore a decentralized inventory system is optimal. This is in contrast to the classical result that when supply is deterministic and demand is stochastic, centralization is optimal due to the risk-pooling effect. When both supply may be disrupted and demand is stochastic, we demonstrate that a risk-averse firm should typically choose a decentralized inventory system design. | - |
dc.language | eng | - |
dc.relation.ispartof | Omega (United Kingdom) | - |
dc.subject | Risk | - |
dc.subject | Inventory control | - |
dc.subject | Supply chain disruptions | - |
dc.title | Centralization versus decentralization: Risk pooling, risk diversification, and supply chain disruptions | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1016/j.omega.2014.06.002 | - |
dc.identifier.scopus | eid_2-s2.0-84921279023 | - |
dc.identifier.volume | 52 | - |
dc.identifier.spage | 201 | - |
dc.identifier.epage | 212 | - |
dc.identifier.isi | WOS:000349586800018 | - |
dc.identifier.issnl | 0305-0483 | - |