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Capacitated Production Control with Virtual Lateral Transshipments

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  • Jian Yang

    (Department of Industrial and Manufacturing Engineering, New Jersey Institute of Technology, Newark, New Jersey 07102)

  • Zhaoqiong Qin

    (Department of Management, Marketing, Strategy and Operations, Embry-Riddle Aeronautical University, Daytona Beach, Florida 32114)

Abstract

We study the optimal control of a firm with two capacitated manufacturing plants situated in two distinct geographical regions. Demands from each region are mostly satisfied by the local plant. However, if necessary, some of the newly arrived demands can be designated to be served by the other, more remote, plant. The sources of the above virtual lateral transshipments, unlike the ones involved in the real lateral transshipments, do not need to have nonnegative inventory levels throughout the transshipment processes. We develop results about the simultaneous preservation of supermodularity and diagonal dominances of the cost functions and then use these results to derive structural results for the optimal policies. Specifically, to perform optimally, we find that each plant should adopt a modified base-stock policy in observance of its own capacity, while the base level should mildly decrease in the other plant's starting inventory level. Our computational results illustrate the benefits realizable by using transshipment.

Suggested Citation

  • Jian Yang & Zhaoqiong Qin, 2007. "Capacitated Production Control with Virtual Lateral Transshipments," Operations Research, INFORMS, vol. 55(6), pages 1104-1119, December.
    • Handle: RePEc:inm:oropre:v:55:y:2007:i:6:p:1104-1119
    DOI: 10.1287/opre.1070.0410
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    References listed on IDEAS

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    3. 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.
    4. Dhahri, Akrem & Gharbi, Ali & Ouhimmou, Mustapha, 2022. "Integrated production-transshipment control policy for a two-location unreliable manufacturing system," International Journal of Production Economics, Elsevier, vol. 247(C).
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    7. 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.
    8. Zhu, Stuart X., 2015. "Analysis of dual sourcing strategies under supply disruptions," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 191-203.
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    13. Bayram, Armagan & Cesaret, Bahriye, 2021. "Order fulfillment policies for ship-from-store implementation in omni-channel retailing," European Journal of Operational Research, Elsevier, vol. 294(3), pages 987-1002.
    14. Snoeck, André & Winkenbach, Matthias & Fransoo, Jan C., 2023. "On-demand last-mile distribution network design with omnichannel inventory," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 180(C).
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