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Service differentiation through selective lateral transshipments

Author

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  • Alvarez, E.M.
  • van der Heijden, M.C.
  • Vliegen, I.M.H.
  • Zijm, W.H.M.

Abstract

We consider a multi-item spare parts problem with multiple warehouses and two customer classes, where lateral transshipments are used as a differentiation tool. Specifically, premium requests that cannot be met from stock at their preferred warehouse may be satisfied from stock at other warehouses (so-called lateral transshipments). We first derive approximations for the mean waiting time per class in a single-item model with selective lateral transshipments. Next, we embed our method in a multi-item model minimizing the holding costs and costs of lateral and emergency shipments from upstream locations in the network. Compared to the option of using only selective emergency shipments for differentiation, the addition of selective lateral transshipments can lead to significant further cost savings (14% on average).

Suggested Citation

  • Alvarez, E.M. & van der Heijden, M.C. & Vliegen, I.M.H. & Zijm, W.H.M., 2014. "Service differentiation through selective lateral transshipments," European Journal of Operational Research, Elsevier, vol. 237(3), pages 824-835.
    • Handle: RePEc:eee:ejores:v:237:y:2014:i:3:p:824-835
    DOI: 10.1016/j.ejor.2014.02.053
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    References listed on IDEAS

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    1. van Wijk, A.C.C. & Adan, I.J.B.F. & van Houtum, G.J., 2012. "Approximate evaluation of multi-location inventory models with lateral transshipments and hold back levels," European Journal of Operational Research, Elsevier, vol. 218(3), pages 624-635.
    2. 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.
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    2. Damla İzmirli & Banu Yetkin Ekren & Vikas Kumar, 2020. "Inventory Share Policy Designs for a Sustainable Omni-Chanel E-Commerce Network," Sustainability, MDPI, vol. 12(23), pages 1-16, December.
    3. Bhatnagar, Rohit & Lin, Bing, 2019. "The joint transshipment and production control policies for multi-location production/inventory systems," European Journal of Operational Research, Elsevier, vol. 275(3), pages 957-970.
    4. Zümbül Atan & Lawrence V. Snyder & George R. Wilson, 2018. "Transshipment policies for systems with multiple retailers and two demand classes," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 40(1), pages 159-186, January.

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