The Multi-Location Transshipment Problem with Positive Replenishment Lead Times
AbstractTransshipments, monitored movements of material at the same echelon of a supply chain, represent an effective pooling mechanism. With a single exception, research on transshipments overlooks replenishment lead times. The only approach for two-location inventory systems with non-negligible lead times could not be generalized to a multi-location setting, and the proposed heuristic method cannot guarantee to provide optimal solutions. This paper uses simulation optimization by combining an LP/network flow formulation with infinitesimal perturbation analysis to examine the multi-location transshipment problem with positive replenishment lead times, and demonstrates the computation of the optimal base stock quantities through sample path optimization. From a methodological perspective, this paper deploys an elegant duality-based gradient computation method to improve computational efficiency. In test problems, our algorithm was also able to achieve better objective values than an existing algorithm.
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Bibliographic InfoPaper provided by Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam. in its series Research Paper with number ERS-2006-048-LIS.
Date of creation: 07 Sep 2006
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Transshipment; Infinitesimal Perturbation Analysis (IPA); Simulation Optimization;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-16 (All new papers)
- NEP-CMP-2006-09-16 (Computational Economics)
- NEP-URE-2006-09-16 (Urban & Real Estate Economics)
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