Advanced

Optimal Policies for Inventory Systems with Lateral Transshipments

Olsson, Fredrik LU (2009) In International Journal of Production Economics1991-01-01+01:00 118. p.175-184
Abstract
Using lateral transshipments can be beneficial in order to improve service levels and to reduce system costs. This paper deals with a single-echelon inventory system with two identical locations. Demands are generated by stationary and independent Poisson processes. In general, if a demand occurs at a location and there is no stock on hand, the demand is assumed to be backordered or lost. However, in this paper, lateral transshipments serve as an emergency supply in case of stock out. In this paper, the rule for lateral transshipments is given, while the ordering policies for normal replenishments are optimized. The transshipment rule is to always transship when there is a shortage at one location and stock on hand at the other. First, we... (More)
Using lateral transshipments can be beneficial in order to improve service levels and to reduce system costs. This paper deals with a single-echelon inventory system with two identical locations. Demands are generated by stationary and independent Poisson processes. In general, if a demand occurs at a location and there is no stock on hand, the demand is assumed to be backordered or lost. However, in this paper, lateral transshipments serve as an emergency supply in case of stock out. In this paper, the rule for lateral transshipments is given, while the ordering policies for normal replenishments are optimized. The transshipment rule is to always transship when there is a shortage at one location and stock on hand at the other. First, we assume that the locations apply (R,Q) policies for normal replenishments, and show that the optimal policies are not necessarily symmetric even though the locations are identical. This means that one cannot in general assume that the optimal policy is symmetric under symmetric assumptions. Second, we relax the assumption of (R,Q) policies and derive the optimal replenishment policy using stochastic dynamic programming. (Less)
Please use this url to cite or link to this publication:
author
organization
publishing date
type
Contribution to journal
publication status
published
subject
keywords
Inventory control, lateral transshipments, dynamic programming, batch ordering policies.
in
International Journal of Production Economics1991-01-01+01:00
volume
118
pages
175 - 184
publisher
Elsevier
external identifiers
  • wos:000265164700024
  • scopus:61449131587
ISSN
0925-5273
DOI
10.1016/j.ijpe.2008.08.021
language
English
LU publication?
yes
id
e35f82c5-c341-4c0b-8864-dcb426628d21 (old id 1314853)
date added to LUP
2009-03-11 11:15:34
date last changed
2017-08-20 03:56:48
@article{e35f82c5-c341-4c0b-8864-dcb426628d21,
  abstract     = {Using lateral transshipments can be beneficial in order to improve service levels and to reduce system costs. This paper deals with a single-echelon inventory system with two identical locations. Demands are generated by stationary and independent Poisson processes. In general, if a demand occurs at a location and there is no stock on hand, the demand is assumed to be backordered or lost. However, in this paper, lateral transshipments serve as an emergency supply in case of stock out. In this paper, the rule for lateral transshipments is given, while the ordering policies for normal replenishments are optimized. The transshipment rule is to always transship when there is a shortage at one location and stock on hand at the other. First, we assume that the locations apply (R,Q) policies for normal replenishments, and show that the optimal policies are not necessarily symmetric even though the locations are identical. This means that one cannot in general assume that the optimal policy is symmetric under symmetric assumptions. Second, we relax the assumption of (R,Q) policies and derive the optimal replenishment policy using stochastic dynamic programming.},
  author       = {Olsson, Fredrik},
  issn         = {0925-5273},
  keyword      = {Inventory control,lateral transshipments,dynamic programming,batch ordering policies.},
  language     = {eng},
  pages        = {175--184},
  publisher    = {Elsevier},
  series       = {International Journal of Production Economics1991-01-01+01:00},
  title        = {Optimal Policies for Inventory Systems with Lateral Transshipments},
  url          = {http://dx.doi.org/10.1016/j.ijpe.2008.08.021},
  volume       = {118},
  year         = {2009},
}