Distribution centre location modelling for differential sales tax structure

Distribution centre location modelling for differential sales tax structure

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Article ID: iaor200647
Country: Netherlands
Volume: 162
Issue: 1
Start Page Number: 191
End Page Number: 205
Publication Date: Apr 2005
Journal: European Journal of Operational Research
Authors: , ,
Keywords: programming: integer, programming: nonlinear
Abstract:

The central sales tax (CST) in India results in a differential sales tax structure. This contributes significantly to distribution network decisions that build logistics inefficiencies in firms operating in India. In this paper, we develop a model for determining distribution centres (DCs) locations considering the impact of CST. A non-linear mixed integer-programming problem that is formulated initially is approximated to a mixed integer-programming problem. Using a numeric example, the effect of CST rates and product variety on DC locations is studied and found to be having impact. It is felt that the Indian Government proposal to switch over from the present sales tax regime to value added tax (VAT) regime would significantly contribute to reducing the logistics inefficiencies of Indian firms.

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