The Economic and Environmental Implications of Centralized Stock Keeping

Authors

  • H. Scott Matthews,

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    • Assistant professor in the Departments of Civil and Environmental Engineering and Engineering and Public Policy at Carnegie Mellon University (CMU), in Pittsburgh, PA, USA.

  • Chris T. Hendrickson

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    • Duquesne Light Professor of Engineering and department head, Department of Civil and Environmental Engineering, CMU.


Carnegie Mellon University, Department of Civil and Environmental Engineering, Porter Hall 119, Pittsburgh, PA 15213-3890, USA hsm@cmu.edu

Summary

Recent changes to the management of inventory and warehousing methods have created significant changes in business processes. These changes have produced economic savings to firms from reduced handling of supplies. The system-wide impacts of this shift in methods on overall cost and the environment are still unclear, however. Reductions in inventories can provide significant environmental savings. In this article, we analyze the changes in inventory control methods and assess the environmental and cost tradeoffs between increased trucking and more efficient centralized warehouses. We consider the case of consolidating the spare-parts inventory at U.S. Department of Defense warehouses and discuss similarities to other existing businesses. The case suggests large economic and environmental benefits due to reductions in warehousing expenses, despite higher transportation costs.

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