Demand Consolidation and Allocation

Aggregation of demand from two or more sources can lead to better utilization of capacity (Gerchak and He 2002). As shown in Fig. 2.6, demand consolidation can take multiple forms that include use of distribution centers, product bundling, demand aggregation (over a wide window ), combining customer deliveries as in home-delivery, and online selling that combines customer orders. 

Consolidation can occur in three different ways by location, by time periods, and by products. Consolidation by location has resulted in companies setting up regional distribution centers, and serving multiple cities from the same distribution center. Staples has used a centralized distribution network (Gourley 1997). Disney Stores uses a dedicated Central DC (CDC) in Memphis to supply more than 100,000 types of products to 360 stores (Jedd 1996). Benetton uses one CDC in Ponzano, Italy, to serve over 6,000 stores in 83 countries (Dapiran 1992). 

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