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Stochastic programming for decentralized newsvendor with transshipment

Listed author(s):
  • Summerfield, Nichalin S.
  • Dror, Moshe
Registered author(s):

    This paper discusses a family of two-stage decentralized inventory problems using a unifying framework (taxonomy) depicted as a multilevel graph. This framework allows us to model and link different problems of competing retailers who independently procure inventory in response to uncertain demand and anticipated inventory decisions of other retailers. In this family of problems, in the ex-post stage, the retailers exercise recourse actions in response to the realized demand and competitors' chosen procurement levels. For example, retailers could coordinate inventory transshipment to satisfy shortage with overage based on profit sharing agreements. Our framework provides a unifying parsimonious view using a single methodological prism for a variety of problems. Equally importantly, as recourse options are laid out, our framework clarifies and contributes a modeling connection between problems in a clear taxonomy of models. This unifying perspective explicitly links work that appeared in isolation and offers future research directions.

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    Article provided by Elsevier in its journal International Journal of Production Economics.

    Volume (Year): 137 (2012)
    Issue (Month): 2 ()
    Pages: 292-303

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    Handle: RePEc:eee:proeco:v:137:y:2012:i:2:p:292-303
    DOI: 10.1016/j.ijpe.2012.02.014
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    1. Nagarajan, Mahesh & Sosic, Greys, 2008. "Game-theoretic analysis of cooperation among supply chain agents: Review and extensions," European Journal of Operational Research, Elsevier, vol. 187(3), pages 719-745, June.
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    3. Tiacci, Lorenzo & Saetta, Stefano, 2011. "Reducing the mean supply delay of spare parts using lateral transshipments policies," International Journal of Production Economics, Elsevier, vol. 133(1), pages 182-191, September.
    4. Dror, Moshe, 1993. "Modeling vehicle routing with uncertain demands as a stochastic program: Properties of the corresponding solution," European Journal of Operational Research, Elsevier, vol. 64(3), pages 432-441, February.
    5. Nils Rudi & Sandeep Kapur & David F. Pyke, 2001. "A Two-Location Inventory Model with Transshipment and Local Decision Making," Management Science, INFORMS, vol. 47(12), pages 1668-1680, December.
    6. Olsson, Fredrik, 2009. "Optimal policies for inventory systems with lateral transshipments," International Journal of Production Economics, Elsevier, vol. 118(1), pages 175-184, March.
    7. George B. Dantzig, 1955. "Linear Programming under Uncertainty," Management Science, INFORMS, vol. 1(3-4), pages 197-206, 04-07.
    8. Xinxin Hu & Izak Duenyas & Roman Kapuscinski, 2007. "Existence of Coordinating Transshipment Prices in a Two-Location Inventory Model," Management Science, INFORMS, vol. 53(8), pages 1289-1302, August.
    9. Hezarkhani, Behzad & Kubiak, Wieslaw, 2010. "A coordinating contract for transshipment in a two-company supply chain," European Journal of Operational Research, Elsevier, vol. 207(1), pages 232-237, November.
    10. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
    11. Tiacci, Lorenzo & Saetta, Stefano, 2011. "A heuristic for balancing the inventory level of different locations through lateral shipments," International Journal of Production Economics, Elsevier, vol. 131(1), pages 87-95, May.
    12. Lee, Young Hae & Jung, Jung Woo & Jeon, Young Sang, 2007. "An effective lateral transshipment policy to improve service level in the supply chain," International Journal of Production Economics, Elsevier, vol. 106(1), pages 115-126, March.
    13. Minner, Stefan & Silver, Edward A., 2005. "Evaluation of two simple extreme transshipment strategies," International Journal of Production Economics, Elsevier, vol. 93(1), pages 1-11, January.
    14. Xiao Huang & Greys SoŇ°i\'{c}, 2010. "Transshipment of Inventories: Dual Allocations vs. Transshipment Prices," Manufacturing & Service Operations Management, INFORMS, vol. 12(2), pages 299-318, February.
    15. Ravi Anupindi & Yehuda Bassok & Eitan Zemel, 2001. "A General Framework for the Study of Decentralized Distribution Systems," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 349-368, February.
    16. 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.
    17. Huang, Xiao & Sosic, Greys, 2010. "Repeated newsvendor game with transshipments under dual allocations," European Journal of Operational Research, Elsevier, vol. 204(2), pages 274-284, July.
    18. Banerjee, Avijit & Burton, Jonathan & Banerjee, Snehamay, 2003. "A simulation study of lateral shipments in single supplier, multiple buyers supply chain networks," International Journal of Production Economics, Elsevier, vol. 81(1), pages 103-114, January.
    19. Jan A. Van Mieghem & Nils Rudi, 2002. "Newsvendor Networks: Inventory Management and Capacity Investment with Discretionary Activities," Manufacturing & Service Operations Management, INFORMS, vol. 4(4), pages 313-335, August.
    20. Harborne W. Stuart, Jr., 2005. "Biform Analysis of Inventory Competition," Manufacturing & Service Operations Management, INFORMS, vol. 7(4), pages 347-359, July.
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