LOCATION OF STOCKS IN DISTRIBUTION NET

Abstract: The aim of developing a distribution network by a trade company, is to provide its customers with a better access to the offered goods. Moving stock of goods closer to the market, by deploying it in regional warehouses decreases lead times, but on the other hand leads to higher cost of carrying safety stock. Generally, the policy concerning stock deployment is not homogeneous for all items. The paper presents two different ways of deployment: in a central warehouse or in a network of regional warehouses. In practice the decision is taken intuitively. For example slow moving and expensive items are placed in central warehouse, while safety stock of fast movers is dispersed and located in Regional Warehouses. In the paper some cost models are developed. They also allow for in-depth analysis of how different identified factors influence the result and decision to be taken.