TY - JOUR

T1 - Enhanced lateral transshipments in a multi-location inventory system

AU - Paterson, Colin

AU - Teunter, Ruud

AU - Glazebrook, Kevin

PY - 2012/9

Y1 - 2012/9

N2 - In 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.

AB - In 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.

KW - Inventory control

KW - Lateral transshipments

KW - Dynamic programming

U2 - 10.1016/j.ejor.2012.03.005

DO - 10.1016/j.ejor.2012.03.005

M3 - Journal article

VL - 221

SP - 317

EP - 327

JO - European Journal of Operational Research

JF - European Journal of Operational Research

SN - 0377-2217

IS - 2

ER -