Mixups in the warehouse centralization and decentralization in the multi-plant firm

Single-plant firms choose quantity/quality levels to maximize profits. Multi-plant firms face this decision and must also choose how many decision makers to have. This paper presents two case studies and a model of a multi-plant firm in which overhead costs are lower with one decision-maker (centralization), but the mass of information and the need for timely decisions make occasional mixups unavaoidable. Multiple decision makers (decentralization) solves the mixup problem. Standardization—treating different outlets similarly in response to costly mixups—appears in the case studies, and is demonstrated as a result in the model.