A case-based roadmap for lateral transshipment in supply chain inventory management

Abstract

Manufacturers and wholesalers are increasingly cost conscious in response to today's hyper-competitive environment. Lateral transshipment (LT) has been proposed as a viable solution to drive total inventory costs down whilst increasing customer service level. Our study proposes five LT decision rules with a case-based roadmap to guide professional inventory management. Results of this large fast moving consumer goods case study company demonstrate superior inventory management performance with implementing a combined reactive and proactive LT strategy to determine whether to transship emergency stock from other warehouse or to backorder from suppliers, size of transshipment, favorite wholesaler, preferred supplier, and extra quantity for preventive LT, which are the key LT decision points among the professional supply chain management practitioners.

Simulation of multi-echelon supply chain inventory transshipment models at different levels

“…Tiacci and Saetta 6 investigated a heuristic for deciding on transshipment policy (i.e., when to transship and how much) and attempting to minimize the expected overall costs. Lau et al 7 proposed five lateral transshipment decision rules with a case-based roadmap to guide professional inventory management. Jaska et al 8 exerted effort to clarify how transshipment may facilitate the improvement of the management of inventory in a disaster relief system.…”