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The Multi Location And Multi Period Transshipment Problem

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The multi-location and multi-period transshipment problem
Fan E
Abstract
In a supply chain, products are not only commonly supplied from suppliers to retailers, but also transferred between each retailers. This paper considers a model with one supplier and multiple retailers, in which both replenishment and transshipment are allowed. Replenishment is the movement of products from suppliers to retailers; Transshipment is the movement of products within retailers.
This model such leads to two optimization problems relied on each other – the optimal replenishment policy and the optimal transshipment policy. This paper first proves that under any feasible transshipment policy the optimal replenishment policy of the model is an order-up-to S
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Technology development enables the application of transshipment (e.g.,transportation among retailers) to achieve those goals. In this way, by pooling their inventories retailers are able to lower necessary inventory levels system-widely and improve their service levels at the same time. In this paper, the optimization of the transshipment policy is an important part to be considered.
There are two types of transshipment: proactive transshipment and reactive trans- shipment. In proactive transshipment models, transshipment are decided before actual demands realized, and usually the object of those is to minimizing handling cost. Almost all of those models are analyzed in periodic review setting, because the start or end of pe- riodic review replenishment models provide the opportunities for redistributing inventories among all retailer. In reactive transshipment models, transshipment are incurred as soon
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as stockout or potential stockout are observed, and commonly the object of those models are to maximize profit. Paterson et al. [2011]
The settings of transshipment models also differ on aspects such as the number of items, the number of echelons, the number of locations, identical locations, unsatisfied de- mands, order policy, pooling, decision making, and transshipment cost structure. Identical locations means if different retailers share identical cost or demand structure; unsatisfied demands means how to handle unsatisfied demand –
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