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The single and multi‐item transshipment problem with fixed transshipment costs

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  • Reut Noham
  • Michal Tzur

Abstract

This article deals with supply chain systems in which lateral transshipments are allowed. For a system with two retailers facing stochastic demand, we relax the assumption of negligible fixed transshipment costs, thus, extending existing results for the single‐item case and introducing a new model with multiple items. The goal is to determine optimal transshipment and replenishment policies, such that the total centralized expected profit of both retailers is maximized. For the single‐item problem with fixed transshipment costs, we develop optimality conditions, analyze the expected profit function, and identify the optimal solution. We extend our analysis to multiple items with joint fixed transshipment costs, a problem that has not been investigated previously in the literature, and show how the optimality conditions may be extended for any number of items. Due to the complexity involved in solving these conditions, we suggest a simple heuristic based on the single‐item results. Finally, we conduct a numerical study that provides managerial insights on the solutions obtained in various settings and demonstrates that the suggested heuristic performs very well. © 2014 Wiley Periodicals, Inc. Naval Research Logistics, 61: 637–664, 2014

Suggested Citation

  • Reut Noham & Michal Tzur, 2014. "The single and multi‐item transshipment problem with fixed transshipment costs," Naval Research Logistics (NRL), John Wiley & Sons, vol. 61(8), pages 637-664, December.
    • Handle: RePEc:wly:navres:v:61:y:2014:i:8:p:637-664
    DOI: 10.1002/nav.21608
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    References listed on IDEAS

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    3. Cavagnini, Rossana & Bertazzi, Luca & Maggioni, Francesca, 2022. "A rolling horizon approach for a multi-stage stochastic fixed-charge transportation problem with transshipment," European Journal of Operational Research, Elsevier, vol. 301(3), pages 912-922.
    4. Fadoi Elleuch, 2023. "The "Lateral Transshipment" Is a Cooperative Tool for Optimizing the Profitability of a Distribution System," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 13(1), pages 128-151.
    5. Zhang, Peng & Xu, Xiaofeng & Shi, Victor & Zhu, Jing, 2020. "Simultaneous inventory competition and transshipment between retailers," International Journal of Production Economics, Elsevier, vol. 230(C).
    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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