IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Approximate evaluation of multi-location inventory models with lateral transshipments and hold back levels

  • van Wijk, A.C.C.
  • Adan, I.J.B.F.
  • van Houtum, G.J.
Registered author(s):

    We consider a continuous-time, single-echelon, multi-location inventory model with Poisson demand processes. In case of a stock-out at a local warehouse, a demand can be fulfilled via a lateral transshipment (LT). Each warehouse is assigned a pre-determined sequence of other warehouses where it will request for an LT. However, a warehouse can hold its last part(s) back from such a request. This is called a hold back pooling policy, where each warehouse has hold back levels determining whether a request for an LT by another warehouse is satisfied. We are interested in the fractions of demand satisfied from stock (fill rate), via an LT, and via an emergency procedure from an external source. From these, the average costs of a policy can be determined. We present a new approximation algorithm for the evaluation of a given policy, approximating the above mentioned fractions. Whereas algorithms currently known in the literature approximate the stream of LT requests from a warehouse by a Poisson process, we use an interrupted Poisson process. This is a process that is turned alternatingly On and Off for exponentially distributed durations. This leads to the On/Off overflow algorithm. In a numerical study we show that this algorithm is significantly more accurate than the algorithm based on Poisson processes, although it requires a longer computation time. Furthermore, we show the benefits of hold back levels, and we illustrate how our algorithm can be used in a heuristic search for the setting of the hold back levels.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.sciencedirect.com/science/article/pii/S0377221711010599
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Elsevier in its journal European Journal of Operational Research.

    Volume (Year): 218 (2012)
    Issue (Month): 3 ()
    Pages: 624-635

    as
    in new window

    Handle: RePEc:eee:ejores:v:218:y:2012:i:3:p:624-635
    Contact details of provider: Web page: http://www.elsevier.com/locate/eor

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. 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.
    2. Noah Gans & Ger Koole & Avishai Mandelbaum, 2003. "Telephone Call Centers: Tutorial, Review, and Research Prospects," Manufacturing & Service Operations Management, INFORMS, vol. 5(2), pages 79-141, September.
    3. Bruce L. Miller, 1969. "A Queueing Reward System with Several Customer Classes," Management Science, INFORMS, vol. 16(3), pages 234-245, November.
    4. Donald M. Topkis, 1968. "Optimal Ordering and Rationing Policies in a Nonstationary Dynamic Inventory Model with n Demand Classes," Management Science, INFORMS, vol. 15(3), pages 160-176, November.
    5. Kutanoglu, Erhan & Mahajan, Mohit, 2009. "An inventory sharing and allocation method for a multi-location service parts logistics network with time-based service levels," European Journal of Operational Research, Elsevier, vol. 194(3), pages 728-742, May.
    6. Liu, Jun & Lee, Chi-Guhn, 2007. "Evaluation of inventory policies with unidirectional substitutions," European Journal of Operational Research, Elsevier, vol. 182(1), pages 145-163, October.
    7. Caggiano, Kathryn E. & Jackson, Peter L. & Muckstadt, John A. & Rappold, James A., 2009. "Efficient computation of time-based customer service levels in a multi-item, multi-echelon supply chain: A practical approach for inventory optimization," European Journal of Operational Research, Elsevier, vol. 199(3), pages 744-749, December.
    8. T. W. Archibald & S. A. E. Sassen & L. C. Thomas, 1997. "An Optimal Policy for a Two Depot Inventory Problem with Stock Transfer," Management Science, INFORMS, vol. 43(2), pages 173-183, February.
    9. 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.
    10. Kranenburg, A.A. & van Houtum, G.J., 2009. "A new partial pooling structure for spare parts networks," European Journal of Operational Research, Elsevier, vol. 199(3), pages 908-921, December.
    11. George Tagaras & Morris A. Cohen, 1992. "Pooling in Two-Location Inventory Systems with Non-Negligible Replenishment Lead Times," Management Science, INFORMS, vol. 38(8), pages 1067-1083, August.
    12. Sven Axsäter, 1990. "Modelling Emergency Lateral Transshipments in Inventory Systems," Management Science, INFORMS, vol. 36(11), pages 1329-1338, November.
    13. Wong, H. & van Houtum, G.J. & Cattrysse, D. & Oudheusden, D. Van, 2006. "Multi-item spare parts systems with lateral transshipments and waiting time constraints," European Journal of Operational Research, Elsevier, vol. 171(3), pages 1071-1093, June.
    14. 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.
    15. Olsson, Fredrik, 2010. "An inventory model with unidirectional lateral transshipments," European Journal of Operational Research, Elsevier, vol. 200(3), pages 725-732, February.
    16. Patrik Alfredsson & Jos Verrijdt, 1999. "Modeling Emergency Supply Flexibility in a Two-Echelon Inventory System," Management Science, INFORMS, vol. 45(10), pages 1416-1431, October.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:eee:ejores:v:218:y:2012:i:3:p:624-635. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.