Incentive Pricing of Shared Services with Normal Distribution of Order Flow

This paper presents simple yet efficient formula for apportionment of cost generated by the variability of flow of requirements (objects, inventory, money) through the shared service center (distribution center, internal bank, some service center) as well as formula for apportionment of the cost generated by the flow, if it were steady. The presented formula assures that shared service center cost are charged fairly and provide incentive for the shared services center counterparts to optimize timing and size of their requirements towards shared services center and minimize the total cost of handling them. Additionally we challenge the marginalist transfer pricing theory.