An inventory positioning and location decision model based on centralized storage and lateral transshipment in multi-echelon supply chain

The two-echelon inventory system considered in this work is based on one single supplier, multiple distribution centers, and multiple retailers. In each echelon safety inventory is centralized stored in several centralized storage centers and lateral transshipment of safety stock is permitted between centralized storage site and non-centralized storage sites. The inventory positioning and location decision model developed focuses on safety stock cost, lateral transshipment cost, transportation cost, construction cost and shortage cost in multi-echelon supply chain. Numerical experiments show that: no matter whether in the echelon of distribution centers or retailers the factors which affect the selection from one single centralized storage center or multiple centralized storage centers are distance between distribution centers or retailers, unit transshipment cost and unit inventory carrying cost.

Multi-Echelon Inventory Model with Emergency Lateral Transshipments

In multi-echelon inventory systems, since neighboring retailers are located at shorter distances than the supplier, a retailer may seek stock from them when it is out of stock, that is, emergency lateral transshipments between retailers are commonly practiced to provide improved order fill rate. In this paper, we develop a continuous review multi-echelon model for consumable products when emergency lateral transshipments between retailers are allowed. Approximations are derived for the expected level of cost and order fill rate of retailers. Simulations conducted to test the validity of the approximate analytical model indi-cate that it performs very well in the cases where fairly high service levels are required. Numerical examples are also presented to illustrate the effects of emergency lateral transshipments on the performance criteria of inventory systems. The results indicate that emergency lateral transshipments will lead to a significant in-crease in the retailer order fail rate and this initiative is most suitable for items with a high penalty cost, or where lost sales are likely.

Joint inventory and transshipment decisions with consumer behavioral heterogeneity

Transshipment is an effective method for reducing mismatches between supply and demand among retailers.Consumers attempting to purchase out-of-stock items may wait for transshipment,purchase at another store,or choose not to buy.In this paper,the consumer behavioral heterogeneity is characterized using the transshipment request rate and consumer switching rate.It affects the replenishment and transshipment decisions,as well as the system profits.The inventory replenishment and transshipment decisions are studied in both centralized and decentralized two-location inventory systems with consumer behavioral heterogeneity.We characterize optimal replenishment decisions in a centralized system,prove the existence of a unique Nash equilibrium in a decentralized system with a specific demand distribution,and determine the coordinating transshipment price for some decentralized systems.In numerical studies,the performance of various systems is analyzed for consumers with identical(symmetric)or differing(asymmetric)behavior between retailers.For scenarios with symmetric consumers,a higher transshipment request rate and consumer switching rate resulted in increased total profit in all systems.For scenarios with asymmetric consumers,the retailer with the higher consumer switching rate should reduce ordering in a centralized system but increase ordering in a decentralized system.Moreover,the retailer with the higher transshipment request rate reduces ordering to increase profit,whereas the other retailer increases order quantity yet earns less profit.