Enhanced lateral transshipments in a multi-location inventory system

Abstract

a b s t r a c tIn managing an inventory network, two approaches to the pooling of stock have been proposed. Reactive transshipments respond to shortages at a location by moving inventory from elsewhere within the network, while proactive stock redistribution seeks to minimize the chance of future stockouts. This paper is the first to propose an enhanced reactive approach in which individual transshipments are viewed as an opportunity for proactive stock redistribution. We adopt a quasi-myopic approach to the development of a strongly performing enhanced reactive transshipment policy. In comparison to a purely reactive approach to transshipment, service levels are improved while a reduction in safety stock levels is achieved. The aggregate costs incurred in managing the system are significantly reduced, especially so for large networks. Moreover, an optimal policy is determined for small networks and it is shown that the enhanced reactive policy substantially closes the gap to optimality.

A bi-objective location-inventory model with capacitated transportation and lateral transshipments

“…Torabi and Moghaddam (2012) considered the proactive lateral transshipments policy in a multi-site productiondistribution system with fuzzy parameters and showed the effect of considering transshipment on the system. Paterson, Teunter, and Glazebrook (2012) introduced an enhanced reactive transshipment policy in which each transshipment brings the opportunity to redistribute the inventory through the network. Their model aims to minimise the total costs including the back order costs.…”

Perspectives of inventory control models in the Physical Internet: A simulation study

“…The literature has shown that transshipment is quite profitable for retailers with long replenishment lead times from suppliers and who are located closer to one another or who spend significant funds on building and operating storage facilities to prevent shortage penalty cost. Recent studies of transshipments research examine the different source selection strategies of the transshipment (Çapar et al, 2011) and the performance of the integration of proactive and reactive transshipments (Paterson et al, 2012). The results of enhanced transshipment show that average costs are reduced by 11% to 17% in comparison with no transshipment.…”

Lateral inventory transshipment problem in online-to-offline supply chain

“…Paterson et al (2011) provided a literature review which categorises the research on lateral transshipment. Much of transshipment literature focuses on two locations, see Rudi, Kapur, and Pyke (2001), Tagaras and Vlachos (2002), Zou, Dresner, and Windle (2010), and Hezarkhani and Kubiak (2010); multi-locations, see Robinson (1990), Archibald, Black, andGlazebrook (2009), Paterson, Teunter, andGlazebrook (2012), and Özdemir, Yücesan, and Herer (2013); and transshipment networks, see Lien et al (2011) andYu, Tang, andNiederhoff (2011). Rudi, Kapur, and Pyke (2001) studied a transshipment case of two locations being individually owned and operated situation by two sellers, where a location has surplus stock and another location is stocked out.…”