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A distribution inventory model with transshipments from a support warehouse

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  • Sven Axsäter
  • Christian Howard
  • Johan Marklund

Abstract

This article considers a distribution inventory system consisting of N retailers and a regional support warehouse, all being replenished from a central warehouse/outside supplier. For the case where stock-outs occur, the retailers receive transshipments from the support warehouse at an extra cost. A model is presented for cost evaluation and optimization of the reorder points in the system under fill rate constraints. The solution method is designed to handle large real-life systems and is fast enough to be directly implemented in practice. A numerical study illustrates that (i) the model renders near-optimal solutions; (ii) the value of using a support warehouse can be significant even for large transshipment costs; and (iii) significant cost savings can be obtained using the proposed model. Using real data for a sample of 50 representative products, the proposed model reduces the expected holding and transshipment costs by 29% while still meeting target fill rates.[Supplemental materials are available for this article. Go to the publisher's online edition of IIE Transactions to view the supplemental file.]

Suggested Citation

  • Sven Axsäter & Christian Howard & Johan Marklund, 2013. "A distribution inventory model with transshipments from a support warehouse," IISE Transactions, Taylor & Francis Journals, vol. 45(3), pages 309-322.
    • Handle: RePEc:taf:uiiexx:v:45:y:2013:i:3:p:309-322
    DOI: 10.1080/0740817X.2012.706375
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    Cited by:

    1. Hadar Amrani & Eugene Khmelnitsky, 2017. "Optimal division of inventory between depot and bases," Naval Research Logistics (NRL), John Wiley & Sons, vol. 64(1), pages 3-18, February.
    2. Biswajit Sarkar & Muhammad Tayyab & Seok-Beom Choi, 2018. "Product Channeling in an O2O Supply Chain Management as Power Transmission in Electric Power Distribution Systems," Mathematics, MDPI, vol. 7(1), pages 1-12, December.
    3. Xie, Wei & Liao, Haitao & Jin, Tongdan, 2014. "Maximizing system availability through joint decision on component redundancy and spares inventory," European Journal of Operational Research, Elsevier, vol. 237(1), pages 164-176.
    4. van Wingerden, E. & Tan, T. & Van Houtum, G.J., 2019. "The impact of an emergency warehouse in a two-echelon spare parts network," European Journal of Operational Research, Elsevier, vol. 276(3), pages 983-997.
    5. Liao, Yi & Shen, Wenjing & Hu, Xinxin & Yang, Shilei, 2014. "Optimal responses to stockouts: Lateral transshipment versus emergency order policies," Omega, Elsevier, vol. 49(C), pages 79-92.
    6. Moghaddam, Mohsen & Nof, Shimon Y., 2014. "Combined demand and capacity sharing with best matching decisions in enterprise collaboration," International Journal of Production Economics, Elsevier, vol. 148(C), pages 93-109.
    7. Axsäter, Sven, 2014. "An improved decision rule for emergency replenishments," International Journal of Production Economics, Elsevier, vol. 157(C), pages 313-317.
    8. Darmawan, Agus & Wong, Hartanto & Thorstenson, Anders, 2021. "Supply chain network design with coordinated inventory control," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 145(C).
    9. Saravanan Venkatachalam & Arunachalam Narayanan, 2016. "Efficient formulation and heuristics for multi-item single source ordering problem with transportation cost," International Journal of Production Research, Taylor & Francis Journals, vol. 54(14), pages 4087-4103, July.
    10. Firouz, Mohammad & Keskin, Burcu B. & Melouk, Sharif H., 2017. "An integrated supplier selection and inventory problem with multi-sourcing and lateral transshipments," Omega, Elsevier, vol. 70(C), pages 77-93.
    11. Bouma, Harmen W. & Teunter, Ruud H., 2014. "The routed inventory pooling problem with three non-identical retailers," International Journal of Production Economics, Elsevier, vol. 156(C), pages 223-234.
    12. García-Benito, Juan Carlos & Martín-Peña, María-Luz, 2021. "A redistribution model with minimum backorders of spare parts: A proposal for the defence sector," European Journal of Operational Research, Elsevier, vol. 291(1), pages 178-193.
    13. Moghaddam, Mohsen & Nof, Shimon Y., 2016. "Real-time optimization and control mechanisms for collaborative demand and capacity sharing," International Journal of Production Economics, Elsevier, vol. 171(P4), pages 495-506.
    14. Van der Heide, G. & Roodbergen, K.J. & Van Foreest, N.D., 2021. "Cross docking for libraries with a depot," European Journal of Operational Research, Elsevier, vol. 290(2), pages 749-765.
    15. Dijkstra, Arjan S. & Van der Heide, Gerlach & Roodbergen, Kees Jan, 2019. "Transshipments of cross-channel returned products," International Journal of Production Economics, Elsevier, vol. 209(C), pages 70-77.
    16. Johansson, Lina & Olsson, Fredrik, 2018. "Age-based inventory control in a multi-echelon system with emergency replenishments," European Journal of Operational Research, Elsevier, vol. 265(3), pages 951-961.
    17. Wang, Jun & Zhu, Xiaoyan, 2021. "Joint optimization of condition-based maintenance and inventory control for a k-out-of-n:F system of multi-state degrading components," European Journal of Operational Research, Elsevier, vol. 290(2), pages 514-529.
    18. Van der Heide, G. & Van Foreest, N.D. & Roodbergen, K.J., 2018. "Optimizing stock levels for rental systems with a support warehouse and partial backordering," European Journal of Operational Research, Elsevier, vol. 265(1), pages 107-118.
    19. Christian Howard & Johan Marklund & Tarkan Tan & Ingrid Reijnen, 2015. "Inventory Control in a Spare Parts Distribution System with Emergency Stocks and Pipeline Information," Manufacturing & Service Operations Management, INFORMS, vol. 17(2), pages 142-156, May.

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