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A two-item two-warehouse periodic review inventory model with transshipment

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  • Koushik Ramakrishna
  • Moosa Sharafali
  • Yun Lim

Abstract

We study a two-item two-warehouse periodic review inventory model that allows transshipment between warehouses and emergency orders. The model helps to determine two decisions: (i) the order up to levels for the two items at the two warehouses, and (ii) whether to accept a transshipment request from the other warehouse. The acceptance of a transshipment request in a warehouse depends on the time until the next review epoch and the inventory level of the warehouse. We propose a search procedure, which is a combination of greedy heuristics and a Lagrangian relaxation method, to minimize the total operating cost of the system. Numerical experiments reveal that optimality can be achieved using the proposed procedure. The time threshold to accept a transshipment request in a warehouse increases with the emergency shipment cost. In addition, the more inventory available in the warehouse the more likely for a transshipment request to be accepted. Copyright Springer Science+Business Media New York 2015

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  • Koushik Ramakrishna & Moosa Sharafali & Yun Lim, 2015. "A two-item two-warehouse periodic review inventory model with transshipment," Annals of Operations Research, Springer, vol. 233(1), pages 365-381, October.
    • Handle: RePEc:spr:annopr:v:233:y:2015:i:1:p:365-381:10.1007/s10479-013-1483-4
    DOI: 10.1007/s10479-013-1483-4
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    References listed on IDEAS

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    Cited by:

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    7. Zhang, Yuankai & Lin, Wei-Hua & Huang, Minfang & Hu, Xiangpei, 2021. "Multi-warehouse package consolidation for split orders in online retailing," European Journal of Operational Research, Elsevier, vol. 289(3), pages 1040-1055.

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