Distribution Center Consolidation Games


We study the location-inventory model as introduced by Teo et al. (2001) to analyze the impact of consolidation of distribution centers on facility and inventory costs. We associate a cooperative game with each location-inventory situation and prove that this game has a non-empty core for identical and independent demand processes. Hence, consolidation does not only lower joint costs (Teo et al. (2001)), but it allows for a stable division of the minimal costs as well.