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Hybrid Lateral Transshipments in a Multi-Location Inventory System

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  • Glazebrook, K.
  • Paterson, Colin
  • Teunter, Ruud

    (Groningen University)

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    Abstract

    In managing networks of stock holding locations, two approaches to the pooling of inventory have been proposed. Reactive transshipm nts respond to stockouts at a location by moving inventory from elsewhere within the network, while proactive redistribution of stock seeks to minimise the chance of future shocks. This paper is the first to propose a hybrid approach in which transshipments are viewed as an opportunity for stock redistribution. We adopt a quasi-myopic approach to the development of a strongly performing hybrid transshipment policy. Numerical studies which utilise dynamic programming and simulation testify to the benefits of using transshipments proactively. In comparison to a purely reactive approach to transshipment, service levels are improved while a reduction in safety stock levels is achieved. The aggregate costs incurred in managing the system are significantly reduced, especially so for large networks facing high levels of demand.

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    File URL: http://irs.ub.rug.nl/ppn/328883719
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    Bibliographic Info

    Paper provided by University of Groningen, Research Institute SOM (Systems, Organisations and Management) in its series Research Report with number 10006.

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    Date of creation: 2010
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    Handle: RePEc:dgr:rugsom:10006

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