A joint location-distribution-inventory model for a multi-echelon supply chain network considering multi-sourcing, drop-shipping, and lateral transhipment

Competitive pressure in the global marketplace requires enterprises to establish efficient distribution planning and inventory management in a supply chain. This study proposes a framework to optimise distribution and inventory decisions, integrating decisions of opening or closing facilities in a multi-echelon supply chain network under non-stationary demand. The model adopts distribution requirements planning (DRP) and considers flexible distribution strategies, including multiple sourcing, drop-shipping, and lateral transhipment to minimise the total expected cost. The original stochastic model has been transformed into an equivalent deterministic mixed-integer linear programming model by using the sample average approximation (SAA) technique. Numerical experiments are conducted to validate the model and its practical applications. The model that adopted multiple flexible distribution strategies outperforms the models that adopted a single distribution strategy. This study is useful for enterprises who sell products through their physical stores and online stores on e-commerce platforms or company private websites.