IDEAS home Printed from https://ideas.repec.org/a/inm/ormsom/v14y2012i2p290-300.html
   My bibliography  Save this article

In-Season Transshipments Among Competitive Retailers

Author

Listed:
  • Nagihan Çömez

    (Faculty of Business Administration, Bilkent University, Bilkent, Ankara 06800, Turkey)

  • Kathryn E. Stecke

    (School of Management, University of Texas at Dallas, Richardson, Texas 75083)

  • Metin Çakanyildirim

    (School of Management, University of Texas at Dallas, Richardson, Texas 75083)

Abstract

A decentralized system of competing retailers that order and sell the same product in a sales season is studied. When a customer demand occurs at a stocked-out retailer, that retailer requests a unit to be transshipped from another retailer who charges a transshipment price. If this request is rejected, the unsatisfied customer may go to another retailer with a customer overflow probability. Each retailer decides on the initial order quantity from a manufacturer and on the acceptance/rejection of each transshipment request. For two retailers, we show that retailers' optimal transshipment policies are dynamic and characterized by chronologically nonincreasing inventory holdback levels. We analytically study the sensitivity of holdback levels to explain interesting findings, such as smaller retailers and geographically distant retailers benefit more from transshipments. Numerical experiments show that retailers substantially benefit from using optimal transshipment policies compared to no sharing. The expected sales increase in all but a handful of over 3,000 problem instances. Building on the two-retailer optimal policies, we suggest an effective heuristic transshipment policy for a multiretailer system.

Suggested Citation

  • Nagihan Çömez & Kathryn E. Stecke & Metin Çakanyildirim, 2012. "In-Season Transshipments Among Competitive Retailers," Manufacturing & Service Operations Management, INFORMS, vol. 14(2), pages 290-300, April.
  • Handle: RePEc:inm:ormsom:v:14:y:2012:i:2:p:290-300
    DOI: 10.1287/msom.1110.0364
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/msom.1110.0364
    Download Restriction: no

    File URL: https://libkey.io/10.1287/msom.1110.0364?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Nagihan Çömez & Kathryn E. Stecke & Metin Çakanyildirim, 2010. "Meeting Correlated Spare Part Demands with Optimal Transshipments," International Journal of Strategic Decision Sciences (IJSDS), IGI Global, vol. 1(2), pages 1-27, April.
    3. Tak C. Lee & Marvin Hersh, 1993. "A Model for Dynamic Airline Seat Inventory Control with Multiple Seat Bookings," Transportation Science, INFORMS, vol. 27(3), pages 252-265, August.
    4. Jian Chen & Youhua Chen & Mahmut Parlar & Yongbo Xiao, 2011. "Optimal inventory and admission policies for drop-shipping retailers serving in-store and online customers," IISE Transactions, Taylor & Francis Journals, vol. 43(5), pages 332-347.
    5. Jing Shao & Harish Krishnan & S. Thomas McCormick, 2011. "Incentives for Transshipment in a Supply Chain with Decentralized Retailers," Manufacturing & Service Operations Management, INFORMS, vol. 13(3), pages 361-372, July.
    6. Ozdemir, Deniz & Yucesan, Enver & Herer, Yale T., 2006. "Multi-location transshipment problem with capacitated transportation," European Journal of Operational Research, Elsevier, vol. 175(1), pages 602-621, November.
    7. Lingxiu Dong & Nils Rudi, 2004. "Who Benefits from Transshipment? Exogenous vs. Endogenous Wholesale Prices," Management Science, INFORMS, vol. 50(5), pages 645-657, May.
    8. Xuan Zhao & Derek Atkins, 2009. "Transshipment between competing retailers," IISE Transactions, Taylor & Francis Journals, vol. 41(8), pages 665-676.
    9. Kalyan Talluri & Garrett van Ryzin, 2004. "Revenue Management Under a General Discrete Choice Model of Consumer Behavior," Management Science, INFORMS, vol. 50(1), pages 15-33, January.
    10. Ravi Anupindi & Yehuda Bassok & Eitan Zemel, 2001. "A General Framework for the Study of Decentralized Distribution Systems," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 349-368, February.
    11. Nils Rudi & Sandeep Kapur & David F. Pyke, 2001. "A Two-Location Inventory Model with Transshipment and Local Decision Making," Management Science, INFORMS, vol. 47(12), pages 1668-1680, December.
    12. Kwan Eng Wee & Maqbool Dada, 2005. "Optimal Policies for Transshipping Inventory in a Retail Network," Management Science, INFORMS, vol. 51(10), pages 1519-1533, October.
    13. Vinayak Deshpande & Morris A. Cohen & Karen Donohue, 2003. "A Threshold Inventory Rationing Policy for Service-Differentiated Demand Classes," Management Science, INFORMS, vol. 49(6), pages 683-703, June.
    14. Yang, Hongsuk & Schrage, Linus, 2009. "Conditions that cause risk pooling to increase inventory," European Journal of Operational Research, Elsevier, vol. 192(3), pages 837-851, February.
    15. Xinxin Hu & Izak Duenyas & Roman Kapuscinski, 2008. "Optimal Joint Inventory and Transshipment Control Under Uncertain Capacity," Operations Research, INFORMS, vol. 56(4), pages 881-897, August.
    16. Ravi Anupindi & Yehuda Bassok, 1999. "Centralization of Stocks: Retailers vs. Manufacturer," Management Science, INFORMS, vol. 45(2), pages 178-191, February.
    17. Jovan Grahovac & Amiya Chakravarty, 2001. "Sharing and Lateral Transshipment of Inventory in a Supply Chain with Expensive Low-Demand Items," Management Science, INFORMS, vol. 47(4), pages 579-594, April.
    18. Hui Zhao & Vinayak Deshpande & Jennifer K. Ryan, 2005. "Inventory Sharing and Rationing in Decentralized Dealer Networks," Management Science, INFORMS, vol. 51(4), pages 531-547, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Khouja, Moutaz & Liu, Xin & Zhou, Jing, 2020. "To sell or not to sell to an off-price retailer in the presence of strategic consumers," Omega, Elsevier, vol. 90(C).
    2. Çömez-Dolgan, Nagihan & Moussawi-Haidar, Lama & Jaber, Mohamad Y. & Cephe, Ecem, 2022. "Capacitated assortment planning of a multi-location system under transshipments," International Journal of Production Economics, Elsevier, vol. 251(C).
    3. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).
    4. Li, Ying & Liao, Yi & Hu, Xinxin & Shen, Wenjing, 2020. "Lateral transshipment with partial request and random switching," Omega, Elsevier, vol. 92(C).
    5. Ji, Xiang & Sun, Jiasen & Wang, Zebin, 2017. "Turn bad into good: Using transshipment-before-buyback for disruptions of stochastic demand," International Journal of Production Economics, Elsevier, vol. 185(C), pages 150-161.
    6. Derhami, Shahab & Montreuil, Benoit & Bau, Guilhem, 2021. "Assessing product availability in omnichannel retail networks in the presence of on-demand inventory transshipment and product substitution," Omega, Elsevier, vol. 102(C).
    7. Yi Liao & Jun Li & Xinxin Hu & Ying Li & Wenjing Shen, 2020. "Application of Lateral Transshipment in Cost Reduction of Decentralized Systems," Sustainability, MDPI, vol. 12(12), pages 1-21, June.
    8. Çömez-Dolgan, Nagihan & Dağ, Hilal & Fescioglu-Unver, Nilgun & Şen, Alper, 2023. "Multi-plant manufacturing assortment planning in the presence of transshipments," European Journal of Operational Research, Elsevier, vol. 310(3), pages 1033-1050.
    9. Park, Seung Jae, 2018. "Swapping inventory between competing firms," International Journal of Production Economics, Elsevier, vol. 199(C), pages 26-46.
    10. Topan, E. & Eruguz, A.S. & Ma, W. & van der Heijden, M.C. & Dekker, R., 2020. "A review of operational spare parts service logistics in service control towers," European Journal of Operational Research, Elsevier, vol. 282(2), pages 401-414.
    11. Juanjuan Qin & Kun Wang & Ziping Wang & Liangjie Xia, 2020. "Revenue sharing contracts for horizontal capacity sharing under competition," Annals of Operations Research, Springer, vol. 291(1), pages 731-760, August.
    12. Shao, Xiao-Feng, 2018. "Production disruption, compensation, and transshipment policies," Omega, Elsevier, vol. 74(C), pages 37-49.
    13. Liang Guo & Xiaole Wu, 2018. "Capacity Sharing Between Competitors," Management Science, INFORMS, vol. 64(8), pages 3554-3573, August.
    14. Zhang, Peng & Shi, Victor & Shao, Lingzhi & Liu, Yang, 2023. "When can a manufacturer benefit from adding a direct sharing channel?," European Journal of Operational Research, Elsevier, vol. 309(1), pages 371-386.
    15. Naderi, Siamak & Kilic, Kemal & Dasci, Abdullah, 2020. "A deterministic model for the transshipment problem of a fast fashion retailer under capacity constraints," International Journal of Production Economics, Elsevier, vol. 227(C).
    16. Chen, Jing & Dong, Ming & Rong, Ying & Yang, Liang, 2018. "Dynamic pricing for deteriorating products with menu cost," Omega, Elsevier, vol. 75(C), pages 13-26.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Ying Rong & Lawrence V. Snyder & Yang Sun, 2010. "Inventory sharing under decentralized preventive transshipments," Naval Research Logistics (NRL), John Wiley & Sons, vol. 57(6), pages 540-562, September.
    3. Li, Ying & Liao, Yi & Hu, Xinxin & Shen, Wenjing, 2020. "Lateral transshipment with partial request and random switching," Omega, Elsevier, vol. 92(C).
    4. Jing Shao & Harish Krishnan & S. Thomas McCormick, 2011. "Incentives for Transshipment in a Supply Chain with Decentralized Retailers," Manufacturing & Service Operations Management, INFORMS, vol. 13(3), pages 361-372, July.
    5. Dong, Yan & Xu, Kefeng & Evers, Philip T., 2012. "Transshipment incentive contracts in a multi-level supply chain," European Journal of Operational Research, Elsevier, vol. 223(2), pages 430-440.
    6. Ji, Xiang & Sun, Jiasen & Wang, Zebin, 2017. "Turn bad into good: Using transshipment-before-buyback for disruptions of stochastic demand," International Journal of Production Economics, Elsevier, vol. 185(C), pages 150-161.
    7. Eda Kemahl{i}ou{g}lu-Ziya & John J. Bartholdi, III, 2011. "Centralizing Inventory in Supply Chains by Using Shapley Value to Allocate the Profits," Manufacturing & Service Operations Management, INFORMS, vol. 13(2), pages 146-162, September.
    8. Yi Liao & Jun Li & Xinxin Hu & Ying Li & Wenjing Shen, 2020. "Application of Lateral Transshipment in Cost Reduction of Decentralized Systems," Sustainability, MDPI, vol. 12(12), pages 1-21, June.
    9. Çömez-Dolgan, Nagihan & Moussawi-Haidar, Lama & Jaber, Mohamad Y. & Cephe, Ecem, 2022. "Capacitated assortment planning of a multi-location system under transshipments," International Journal of Production Economics, Elsevier, vol. 251(C).
    10. Çömez-Dolgan, Nagihan & Dağ, Hilal & Fescioglu-Unver, Nilgun & Şen, Alper, 2023. "Multi-plant manufacturing assortment planning in the presence of transshipments," European Journal of Operational Research, Elsevier, vol. 310(3), pages 1033-1050.
    11. Xin Fang & Soo-Haeng Cho, 2014. "Stability and Endogenous Formation of Inventory Transshipment Networks," Operations Research, INFORMS, vol. 62(6), pages 1316-1334, December.
    12. Ziteng Wang & Yue Dai & Shu‐Cherng Fang & Zhong‐Zhong Jiang & Yifan Xu, 2020. "Inventory transshipment game with limited supply: Trap or treat," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(6), pages 383-403, September.
    13. T W Archibald & D P Black & K D Glazebrook, 2010. "The use of simple calibrations of individual locations in making transshipment decisions in a multi-location inventory network," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(2), pages 294-305, February.
    14. Lee, Chungseung & Park, Kun Soo, 2016. "Inventory and transshipment decisions in the rationing game under capacity uncertainty," Omega, Elsevier, vol. 65(C), pages 82-97.
    15. Hui Zhao & Vinayak Deshpande & Jennifer K. Ryan, 2006. "Emergency transshipment in decentralized dealer networks: When to send and accept transshipment requests," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(6), pages 547-567, September.
    16. van Wijk, A.C.C. & Adan, I.J.B.F. & van Houtum, G.J., 2019. "Optimal lateral transshipment policies for a two location inventory problem with multiple demand classes," European Journal of Operational Research, Elsevier, vol. 272(2), pages 481-495.
    17. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).
    18. Silbermayr, Lena & Gerchak, Yigal, 2019. "Partial pooling by independent firms with allocation according to contribution to pool," International Journal of Production Economics, Elsevier, vol. 218(C), pages 375-385.
    19. Shan Li & Kay‐Yut Chen, 2020. "The Commitment Conundrum of Inventory Sharing," Production and Operations Management, Production and Operations Management Society, vol. 29(2), pages 353-370, February.
    20. Huang, Xiao & Sosic, Greys, 2010. "Repeated newsvendor game with transshipments under dual allocations," European Journal of Operational Research, Elsevier, vol. 204(2), pages 274-284, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormsom:v:14:y:2012:i:2:p:290-300. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.