Pooling in Two-Location Inventory Systems with Non-Negligible Replenishment Lead Times

Tagaras, George; Cohen, Morris A.

doi:10.1287/mnsc.38.8.1067

Cited by 152 publications

(79 citation statements)

References 12 publications

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“…Archibald et al (1997) characterized the optimal policy for a two-location continuous-review problem. Tagaras and Cohen (1992) compared different rules for lateral transshipments by simulation. Recently, Rudi et al (2001) considered decentralized decision making in the presence of transshipments and derived the optimal prices that lead to joint-profit maximization.…”

Section: Literature Surveymentioning

confidence: 99%

Capacitated Production Control with Virtual Lateral Transshipments

Yang

Qin

2007

Operations Research

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We study the optimal control of a firm with two capacitated manufacturing plants situated in two distinct geographical regions. Demands from each region are mostly satisfied by the local plant. However, if necessary, some of the newly arrived demands can be designated to be served by the other, more remote, plant. The sources of the above virtual lateral transshipments, unlike the ones involved in the real lateral transshipments, do not need to have nonnegative inventory levels throughout the transshipment processes. We develop results about the simultaneous preservation of supermodularity and diagonal dominances of the cost functions and then use these results to derive structural results for the optimal policies. Specifically, to perform optimally, we find that each plant should adopt a modified base-stock policy in observance of its own capacity, while the base level should mildly decrease in the other plant's starting inventory level. Our computational results illustrate the benefits realizable by using transshipment.

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Section: Literature Surveymentioning

confidence: 99%

Capacitated Production Control with Virtual Lateral Transshipments

Yang

Qin

2007

Operations Research

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“…For example, several papers focus on calculating static base-stock levels in a periodic review environment (Herer et al 2006;Karmarkar 1981;Krishnan and Rao 1965;Robinson 1990). For instance, Tagaras and Cohen (1992) examine the performance of a static base-stock policy for a two-location system with instantaneous transshipment and backorders, under different pooling policies; the paper develops effective heuristics for finding the base stock levels, as well as establishes the value from pooling or transshipment. Diks and de Kok (1996) consider a two-echelon system with backorders and with instantaneous transshipment between the retailers in each review period for rebalancing; they develop a periodic review policy for allocating the system inventory to the retailers, and are able to characterize the value from transshipment.…”

Section: Literature Reviewmentioning

confidence: 99%

Mitigating Spillover in Online Retailing via Replenishment

Acimovic

Graves

2017

M&SOM

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Online purchases constitute about one tenth of US retail sales. The supply chains that support online retailing are fundamentally different from those that support traditional brick-and-mortar stores. Traditional solutions are not always appropriate to solve online retailing's operations problems; thus, there is an opportunity to understand and improve these novel supply chains. One key characteristic of the inventory systems for online retailing is demand spillover, whereby a stockout at a fulfillment center (FC) results in demand spilling over to another FC. For this context we examine how to allocate inventory to the FCs under a periodic-review joint-replenishment policy, with an objective to minimize outbound shipping costs for a fixed amount of inventory. We first show how traditional decentralized allocation policies may perform suboptimally and induce dynamics (whiplash) that result in costly spillover. We find that this phenomenon increases with the prevalence of local stockouts and with the level of inventory imbalance. We then describe why inventory imbalance occurs in online retailing due to operational realities and provide evidence based on real data. Finally, we propose a heuristic to allocate inventory accounting for possible spillover during the lead time. We test the heuristic by a simulation and show that it performs better than the status quo policy, is robust to operational realities, and captures over 90% of the possible improvement as compared to a pseudo-optimal policy.

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“…Das (1975) extends the model of Gross (1963) by allowing transshipment in the middle of each period for the redistribution of inventories. In many follow-up studies with similar one-time transshipment opportunity models, the transshipments are analysed in terms of their effect on stocking decisions either in centrally (Robinson, 1990;Tagaras and Cohen, 1992) or decentrally managed settings (Hu et al, 2007;Zhao and Atkins, 2009).…”

Section: Related Literature and Our Contributionsmentioning

confidence: 99%

Managing transshipments in a multi-retailer system with approximate policies

Çömez-Dolgan

Fescioglu-Ünver

2015

Journal of the Operational Research Society

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Using the right transshipment policy is important when transshipments are exercised under demand uncertainty. Optimal transshipment policy can be quite complex in a multi-firm system as optimal actions depend on all system variables. Moreover, both how to select requested retailer and how to respond to requests are in question. We introduce simple, close-to-optimal heuristic transshipment policies for multiple retailers. We first show that heuristic policies may perform even better than self-optimal policy, which is explained by Braess's paradox. Then we test the performances of various heuristics with respect to centrally optimal policy. When retailers can observe others' inventory levels, more effective transshipments can be made. Otherwise, a random selection performs quite well. We also observe that although always-accept respond policy is quite close to centrally optimal in small systems, the performance of pairwise-optimal holdback levels to respond requests is more clear and consistent for larger systems.

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Pooling in Two-Location Inventory Systems with Non-Negligible Replenishment Lead Times

Cited by 152 publications

References 12 publications

Capacitated Production Control with Virtual Lateral Transshipments

Capacitated Production Control with Virtual Lateral Transshipments

Mitigating Spillover in Online Retailing via Replenishment

Managing transshipments in a multi-retailer system with approximate policies

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