Optimal joint replenishment and transshipment policies for an omnichannel retailer utilizing a ship-from-store strategy

Omnichannel retail enables consumers to shop seamlessly across multiple channels, with the Ship-From-Store (SFS) strategy — a prominent approach that fulfills online orders from physical stores — gaining widespread adoption. While effective, SFS introduces challenges related to demand pooling, complicating inventory management across channels. This paper investigates the joint replenishment, transshipment, and fulfillment problem for an omnichannel retailer operating physical stores under the SFS strategy. We propose a novel analytical framework that integrates proactive and reactive transshipments with periodic replenishment and dual-channel fulfillment. The analysis identifies key structural properties of the cost functions and, for a two-store omnichannel retail system, characterizes the optimal policies using switching curves, demonstrating that these policies can be derived efficiently through hedging point computations without explicitly visualizing the curves. We further extend the analysis to a stationary multi-store setting, establishing the optimality of a myopic base-stock policy as a simple yet robust decision-making framework. Numerical experiments show that jointly optimizing replenishment and proactive transshipment substantially reduces total operating costs, particularly under high demand volatility, by leveraging cross-store inventory pooling. These findings provide actionable insights for designing efficient and practical omnichannel fulfillment strategies.