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Emergency transshipment in decentralized dealer networks: When to send and accept transshipment requests

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  • Hui Zhao
  • Vinayak Deshpande
  • Jennifer K. Ryan

Abstract

While there has been significant previous literature on inventory transshipment, most research has focused on the dealers' demand filling decision (when to fill transshipment requests from other dealers), ignoring the requesting decision (when to send transshipment requests to other dealers). In this paper we develop optimal inventory transshipment policies that incorporate both types of decisions. We consider a decentralized system in which the dealers are independent of the manufacturer and of each other. We first study a network consisting of a very large number of dealers. We prove that the optimal inventory and transshipment decisions for an individual dealer are controlled by threshold rationing and requesting levels. Then, in order to study the impact of transshipment among independent dealers in a smaller dealer network, we consider a decentralized two‐dealer network and use a game theoretic approach to characterize the equilibrium inventory strategies of the individual dealers. An extensive numerical study highlights the impact of the requesting decision on the dealers' equilibrium behavior in a decentralized setting. © 2006 Wiley Periodicals, Inc. Naval Research Logistics, 2006

Suggested Citation

  • Hui Zhao & Vinayak Deshpande & Jennifer K. Ryan, 2006. "Emergency transshipment in decentralized dealer networks: When to send and accept transshipment requests," Naval Research Logistics (NRL), John Wiley & Sons, vol. 53(6), pages 547-567, September.
    • Handle: RePEc:wly:navres:v:53:y:2006:i:6:p:547-567
    DOI: 10.1002/nav.20160
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    Cited by:

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    3. van Wijk, A.C.C. & Adan, I.J.B.F. & van Houtum, G.J., 2019. "Optimal lateral transshipment policies for a two location inventory problem with multiple demand classes," European Journal of Operational Research, Elsevier, vol. 272(2), pages 481-495.
    4. 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.
    5. 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).
    6. Cem Deniz Caglar Bozkir & O. Erhun Kundakcioglu & Andrea C. Henry, 2022. "Hospital service levels during drug shortages: Stocking and transshipment policies for pharmaceutical inventory," Journal of Global Optimization, Springer, vol. 83(3), pages 565-584, July.
    7. Çömez-Dolgan, Nagihan & Dağ, Hilal & Fescioglu-Unver, Nilgun & Şen, Alper, 2023. "Multi-plant manufacturing assortment planning in the presence of transshipments," European Journal of Operational Research, Elsevier, vol. 310(3), pages 1033-1050.
    8. Ying Rong & Lawrence V. Snyder & Yang Sun, 2010. "Inventory sharing under decentralized preventive transshipments," Naval Research Logistics (NRL), John Wiley & Sons, vol. 57(6), pages 540-562, September.
    9. Xinghao Yan & Hui Zhao, 2011. "TECHNICAL NOTE---Decentralized Inventory Sharing with Asymmetric Information," Operations Research, INFORMS, vol. 59(6), pages 1528-1538, December.
    10. Liqiang Liu & Ivo Adan & David Perry, 2022. "Two perishable inventory systems with one-way substitution," Annals of Operations Research, Springer, vol. 317(1), pages 107-128, October.
    11. Frank Karsten & Marco Slikker & Geert‐Jan van Houtum, 2012. "Inventory pooling games for expensive, low‐demand spare parts," Naval Research Logistics (NRL), John Wiley & Sons, vol. 59(5), pages 311-324, August.
    12. Ping Zhang & Hong Yan & King Wah Pang, 2019. "Inventory Sharing Strategy for Disposable Medical Items between Two Hospitals," Sustainability, MDPI, vol. 11(22), pages 1-21, November.
    13. LI, Li, 2019. "Cooperative purchasing and preactive inventory sharing – Channel balancing and performance improvement," European Journal of Operational Research, Elsevier, vol. 278(3), pages 738-751.
    14. Somarin, Aghil Rezaei & Sharma, Pankaj & Tiwari, Sunil & Chen, Songlin, 2023. "Stock reallocation policy for repairable service parts in case of supply disruptions due to extreme weather events," International Journal of Production Economics, Elsevier, vol. 256(C).
    15. Eran Hanany & Michal Tzur & Alon Levran, 2010. "The transshipment fund mechanism: Coordinating the decentralized multilocation transshipment problem," Naval Research Logistics (NRL), John Wiley & Sons, vol. 57(4), pages 342-353, June.

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