Two-Echelon Inventory Model With Service Consideration and Lateral Transshipment

Abstract

This paper considers a two-echelon inventory system with service consideration and lateral transshipment. So far, researchers have not extensively considered the use of lateral transshipment for such systems. Demand arrivals at both echelons follow the Poisson process. We introduce a continuous review base stock policy for the system in steady state, which determined the expected level for on-hand inventory, expected lateral transshipment level and expected backorder level. We showed that the model satisfied convexity with respect to base stock level. Computational experiments showed that the model with lateral transshipment performed better that the model without lateral transshipment.

Two-echelon inventory location model with response time requirement and lateral transshipment

“…Their model focused on just inventory decisions while the model presented in this study considers systems where decisions on facility location and inventory are integrated. Thus, the integration of location and inventory decisions makes our model different from the model presented by [11] .…”

“…They also discussed existing research gaps in this field. [11] considered a two echelon inventory system with service consideration and lateral transshipment. Their model focused on just inventory decisions while the model presented in this study considers systems where decisions on facility location and inventory are integrated.…”