Decentralised and centralised control of a two-stage distribution system
by Qiu Minmin, Zhao Xiaobo
International Journal of Services Operations and Informatics (IJSOI), Vol. 1, No. 1/2, 2006

Abstract: This paper analyses the inventory costs of a two-stage distribution system consisting of one warehouse and multiple retailers. When the distribution system is decentralised, we model the decision problem of each player into a Markov decision process by introducing an order-delivery rate matrix. An iterative algorithm is developed to obtain the system equilibrium. When the system is centralised, we directly model the decision problem into a Markov decision process. A numerical example shows that the cost of the centralised distribution system is about 40% lower than the cost of the decentralised system. Furthermore, some properties of the costs are numerically observed.

Online publication date: Sat, 08-Jul-2006

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