Effects of Pooling on the Optimization and Service Levels of Two-Location Inventory Systems

Tagaras, George

doi:10.1080/07408178908966229

Cited by 168 publications

(125 citation statements)

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“…Krishnan & Rao (1965) modelled the costs for emergency transshipments from n locations. Tagaras (1989) generalized Krishnan & Rao's cost structure. Lee (1987), Axsäter (1990), and Kukreja et al (2001) used queuing theory methods to estimate the cross filling effect in continuous review multi-location inventory systems with stochastic demand.…”

Section: Introductionmentioning

confidence: 99%

The impact of different demand allocation rules on total stock levels

Wanke

2010

Pesqui. Oper.

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This manuscript compares two different rules for allocating demands to serving facilities and their impact on total stock levels: the one proposed by Tyagi & Das (1998) and the cross filling practice. The EOQ and the ROP methods are used for setting cycle and safety stocks. Its is demonstrated that the minimization of the consolidated inventory levels within these rules leads to different allocation policies, frequently adopted by companies: one single facility sharing, dedicated facilities and full decentralization. Sensitivity analyses are conducted to identify the most relevant variables accountable for the differences in total stock levels among these three policies. Results suggest different benefit opportunities that may favor one policy to the detriment of the others. A framework synthesizing the findings is presented, so as to help in decision making. Potential impacts in terms of service levels and distribution costs are also evaluated qualitatively.Keywords: allocation rules; stock levels; inventory portfolios. ResumoEsse artigo compara duas diferentes regras para alocação da demanda às instalações de serviço e seus impactos nos níveis totais de estoque: a regra proposta por Tyagi & Das (1998) e a prática de transferência entre instalações. Os métodos do lote econômico de compras e do ponto de pedido são usados para determinação dos níveis de estoque de ciclo e de segurança. É demonstrado que a minimização dos níveis agregados de estoque nessas regras leva a diferentes políticas de alocação freqüentemente adotadas pelas empresas: compartilhamento de uma única instalação de serviço, instalações de serviço dedicadas e descentralização total do atendimento. Análises de sensibilidade são conduzidas para identificar as variáveis mais relevantes, responsáveis pela diferença nos níveis totais de estoque entre essas três políticas. Os resultados sugerem diferentes oportunidades que podem favorecer uma dada política em detrimento das outras. Um quadro conceitual sintetizando os achados é apresentado, de modo a auxiliar na tomada de decisão. Os impactos potenciais em termos de níveis de serviço e dos custos de distribuição também são avaliados em termos qualitativos.Palavras-chave: regras de alocação; níveis de estoque; portifólio de estoques.

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Section: Introductionmentioning

confidence: 99%

The impact of different demand allocation rules on total stock levels

Wanke

2010

Pesqui. Oper.

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“…Fix an optimal solution to this LP and denote it by T cp (a), standing for complete pooling transshipment quantities given the vector a, an extended interpretation of the complete pooling term for two retailers coined by Tagaras [18]. When multiple optimal solutions exist, any tie breaking rule may be applied.…”

Section: Coordinationmentioning

confidence: 99%

“…Since only two scenarios for excess supply/demand are applicable for two retailers, depending on the transshipment direction between them, we can use a linear price payment: c is is the price paid to i per unit of excess supply, and c si is the price paid by i per unit of excess demand. (6) reduces to the one in Tagaras [18] and Robinson [14], which can be written for both i as…”

Section: Two Retailersmentioning

confidence: 99%

“…This includes for example the work of Krishnan and Rao [13], Tagaras [18], Robinson [14], and, more recently, Correspondence to: E. Hanany (hananye@post.tau.ac.il) Herer et al [10]. Other works have addressed decentralized inventory systems, either with transshipments, see for example, Rudi et al [15], or structured with more general (mostly vertical) supply chains, see for example, the survey by Cachon [3].…”

Section: Introductionmentioning

confidence: 99%

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The transshipment fund mechanism: Coordinating the decentralized multilocation transshipment problem

Hanany

Tzur

Levran

2010

Naval Research Logistics

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Abstract:The multilocation replenishment and transshipment problem is concerned with several retailers facing random demand for the same item at distinct markets, that may use transshipments to eliminate excess inventory/shortages after demand realization. When the system is decentralized so that each retailer operates to maximize their own profit, there are incentive problems that prevent coordination. These problems arise even with two retailers who may pay each other for transshipped units. We propose a new mechanism based on a transshipment fund, which is the first to coordinate the system, in a fully noncooperative setting, for all instances of two retailers as well as all instances of any number of retailers. Moreover, our mechanism strongly coordinates the system, i.e., achieves coordination as the unique equilibrium. The computation and information requirements of this mechanism are realistic and relatively modest. We also present necessary and sufficient conditions for coordination and prove they are always satisfied with our mechanism. Numerical examples illustrate some of the properties underlying this mechanism for two retailers.

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“…Ahmadi, Torabi, and TavakkoliMoghaddam 2016;Bouma and Teunter 2016;Dong and Rudi 2004;Nakandala, Lau, and Shum 2017;Smirnov and Gerchak 2014;Tagaras 1989). In practice, however, transshipments often take place with independent locations maximising their own profits (Rudi, Kapur, and Pyke 2001).…”

Section: Introductionmentioning

confidence: 99%

Risk pooling via unidirectional inventory transshipments in a decentralized supply chain

Arıkan

Silbermayr

2017

International Journal of Production Research

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We study risk pooling via unidirectional lateral transshipments between two locations under local decision-making. Unidirectional transshipments can be applicable when cost structures and/or capabilities differ between locations, and it is also a common practice in dual channel supply chains with online and offline sales channels. We show that such a system cannot be coordinated only with varying transshipment prices. The transshipment receiver orders more and the transshipment giver orders less than the respective optimal centralised order quantities. In order to remove this discrepancy, we suggest horizontal coordination mechanisms by introducing a leftover subsidy for the location providing the transshipments or a shortage subsidy for the location receiving transshipments as well as a combination of shortage and leftover subsidy. Further, we evaluate the impact of network structure by comparing the equilibrium order quantities and profits under the uni-and bidirectional systems as well as a system without transshipments. Since demand correlation is a critical aspect in risk pooling we provide a detailed numerical study to discuss its impact on our findings.

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Effects of Pooling on the Optimization and Service Levels of Two-Location Inventory Systems

Cited by 168 publications

References 4 publications

The impact of different demand allocation rules on total stock levels

The impact of different demand allocation rules on total stock levels

The transshipment fund mechanism: Coordinating the decentralized multilocation transshipment problem

Risk pooling via unidirectional inventory transshipments in a decentralized supply chain

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