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How to order and transship in multi-location inventory systems: The simulation optimization approach

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  • Hochmuth, Christian A.
  • Köchel, Peter

Abstract

The efficient control of multi-location inventory systems with lateral transshipments has become increasingly important. However, existing models are analytically solvable only under simplifying assumptions. There is a variety of heuristics to find approximate solutions, but interdependencies between ordering and transshipment decisions for continuous time are not addressed. Thus, we suggest using simulation optimization. In our paper, we describe a widely adaptable simulation model for mapping highly complex multi-location inventory systems with lateral transshipments. By applying this model to a special case from the literature and to some examples, we show its validity and generality.

Suggested Citation

  • Hochmuth, Christian A. & Köchel, Peter, 2012. "How to order and transship in multi-location inventory systems: The simulation optimization approach," International Journal of Production Economics, Elsevier, vol. 140(2), pages 646-654.
    • Handle: RePEc:eee:proeco:v:140:y:2012:i:2:p:646-654
    DOI: 10.1016/j.ijpe.2011.09.021
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    References listed on IDEAS

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    1. Lawrence W. Robinson, 1990. "Optimal and Approximate Policies in Multiperiod, Multilocation Inventory Models with Transshipments," Operations Research, INFORMS, vol. 38(2), pages 278-295, April.
    2. Anil Kukreja & Charles P. Schmidt & David M. Miller, 2001. "Stocking Decisions for Low-Usage Items in a Multilocation Inventory System," Management Science, INFORMS, vol. 47(10), pages 1371-1383, October.
    3. Tiacci, Lorenzo & Saetta, Stefano, 2011. "Reducing the mean supply delay of spare parts using lateral transshipments policies," International Journal of Production Economics, Elsevier, vol. 133(1), pages 182-191, September.
    4. Paterson, Colin & Kiesmüller, Gudrun & Teunter, Ruud & Glazebrook, Kevin, 2011. "Inventory models with lateral transshipments: A review," European Journal of Operational Research, Elsevier, vol. 210(2), pages 125-136, April.
    5. Evers, Philip T., 2001. "Heuristics for assessing emergency transshipments," European Journal of Operational Research, Elsevier, vol. 129(2), pages 311-316, March.
    6. Xu, Kefeng & Evers, Philip T. & Fu, Michael C., 2003. "Estimating customer service in a two-location continuous review inventory model with emergency transshipments," European Journal of Operational Research, Elsevier, vol. 145(3), pages 569-584, March.
    7. Lee, Young Hae & Jung, Jung Woo & Jeon, Young Sang, 2007. "An effective lateral transshipment policy to improve service level in the supply chain," International Journal of Production Economics, Elsevier, vol. 106(1), pages 115-126, March.
    8. Minner, Stefan & Silver, Edward A. & Robb, David J., 2003. "An improved heuristic for deciding on emergency transshipments," European Journal of Operational Research, Elsevier, vol. 148(2), pages 384-400, July.
    9. Burton, Jonathan & Banerjee, Avijit, 2005. "Cost-parametric analysis of lateral transshipment policies in two-echelon supply chains," International Journal of Production Economics, Elsevier, vol. 93(1), pages 169-178, January.
    10. Kochel, P. & Nielander, U., 2005. "Simulation-based optimisation of multi-echelon inventory systems," International Journal of Production Economics, Elsevier, vol. 93(1), pages 505-513, January.
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    Cited by:

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    2. Tai, Allen H. & Ching, Wai-Ki, 2014. "Optimal inventory policy for a Markovian two-echelon system with returns and lateral transshipment," International Journal of Production Economics, Elsevier, vol. 151(C), pages 48-55.
    3. Cem Deniz Caglar Bozkir & O. Erhun Kundakcioglu & Andrea C. Henry, 2022. "Hospital service levels during drug shortages: Stocking and transshipment policies for pharmaceutical inventory," Journal of Global Optimization, Springer, vol. 83(3), pages 565-584, July.
    4. Mirzapour Al-e-hashem, S.M.J. & Rekik, Yacine, 2014. "Multi-product multi-period Inventory Routing Problem with a transshipment option: A green approach," International Journal of Production Economics, Elsevier, vol. 157(C), pages 80-88.
    5. García-Benito, Juan Carlos & Martín-Peña, María-Luz, 2021. "A redistribution model with minimum backorders of spare parts: A proposal for the defence sector," European Journal of Operational Research, Elsevier, vol. 291(1), pages 178-193.
    6. Dijkstra, Arjan S. & Van der Heide, Gerlach & Roodbergen, Kees Jan, 2019. "Transshipments of cross-channel returned products," International Journal of Production Economics, Elsevier, vol. 209(C), pages 70-77.

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