Storage pricing and allocation in a headquarter-managed centralized distribution center

Ting Zhang, George Q. Huang, Hao Luo, Runyang Zhong

Research output: Journal article publicationConference articleAcademic researchpeer-review

2 Citations (Scopus)


A headquarter-managed centralized distribution center (HQ-CDC) is considered in this study to serve multiple subsidiaries with stochastic demands. Dedicated space is reserved for each subsidiary for the duration of a time period, with re-allocation permitted at the beginning of each period. The subsidiaries are also allowed to fulfill their storage needs by supplementing their reserved spaces with leased spaces at any time point but with a higher price. The paper compares two pricing policies: the constant pricing where the unit space price remains constant and dynamic pricing where the HQ-CDC is allowed to adjust the space price. A series of numerical studies is conducted. The results show that the group company's total cost is significantly reduced by the implementation of the dynamic pricing policy. The results also reveal that the implementation of the leased space leads to a more flexible space utilization in the HQ-CDC and reduces the group company's total cost especially in face of large demand and high demand fluctuation.

Original languageEnglish
Pages (from-to)33-38
Number of pages6
JournalProcedia CIRP
Issue numberC
Publication statusPublished - Mar 2014
Externally publishedYes
EventInternational Conference on Digital Enterprise Technology - DET 2014 Disruptive Innovation in Manufacturing Engineering towards the 4th Industrial Revolution - Stuttgart, Germany
Duration: 25 Mar 201428 Mar 2014


  • Centralized distribution center
  • Dynamic pricing
  • Stochastic demand

ASJC Scopus subject areas

  • Control and Systems Engineering
  • Industrial and Manufacturing Engineering


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