THE LOGISTICS-COST LOCATION-PRODUCTION PROBLEM

The paper applies an inventory model to the standard Weber-Moses location-production problem. By setting the problem within a time framework, costs are seen to be incurred by both the holding of goods and the shipment of goods. The optimum location of the firm is seen to depend not only on transportation costs and the nature of the firm's production function, but also on the value of the materials being shipped. Under these conditions there is no homogeneous solution to the Weber-Moses problem. Furthermore, it is shown that the value added at the point of production is the primary factor which governs the optimum location of the firm.