IDEAS home Printed from https://ideas.repec.org/a/wly/navres/v57y2010i4p342-353.html
   My bibliography  Save this article

The transshipment fund mechanism: Coordinating the decentralized multilocation transshipment problem

Author

Listed:
  • Eran Hanany
  • Michal Tzur
  • Alon Levran

Abstract

The multilocation replenishment and transshipment problem is concerned with several retailers facing random demand for the same item at distinct markets, that may use transshipments to eliminate excess inventory/shortages after demand realization. When the system is decentralized so that each retailer operates to maximize their own profit, there are incentive problems that prevent coordination. These problems arise even with two retailers who may pay each other for transshipped units. We propose a new mechanism based on a transshipment fund, which is the first to coordinate the system, in a fully noncooperative setting, for all instances of two retailers as well as all instances of any number of retailers. Moreover, our mechanism strongly coordinates the system, i.e., achieves coordination as the unique equilibrium. The computation and information requirements of this mechanism are realistic and relatively modest. We also present necessary and sufficient conditions for coordination and prove they are always satisfied with our mechanism. Numerical examples illustrate some of the properties underlying this mechanism for two retailers. © 2010 Wiley Periodicals, Inc. Naval Research Logistics, 2010

Suggested Citation

  • 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.
    • Handle: RePEc:wly:navres:v:57:y:2010:i:4:p:342-353
    DOI: 10.1002/nav.20405
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/nav.20405
    Download Restriction: no
    File URL: https://libkey.io/10.1002/nav.20405?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lawrence W. Robinson, 1990. "Optimal and Approximate Policies in Multiperiod, Multilocation Inventory Models with Transshipments," Operations Research, INFORMS, vol. 38(2), pages 278-295, April.
    2. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    3. Jan A. Van Mieghem, 1999. "Coordinating Investment, Production, and Subcontracting," Management Science, INFORMS, vol. 45(7), pages 954-971, July.
    4. 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.
    5. Gérard P. Cachon & Paul H. Zipkin, 1999. "Competitive and Cooperative Inventory Policies in a Two-Stage Supply Chain," Management Science, INFORMS, vol. 45(7), pages 936-953, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ziteng Wang & Yue Dai & Shu‐Cherng Fang & Zhong‐Zhong Jiang & Yifan Xu, 2020. "Inventory transshipment game with limited supply: Trap or treat," Naval Research Logistics (NRL), John Wiley & Sons, vol. 67(6), pages 383-403, September.
    2. Kopel, Michael & Löffler, Clemens, 2023. "Tax differences and international location strategies," International Journal of Production Economics, Elsevier, vol. 256(C).
    3. Silbermayr, Lena, 2020. "A review of non-cooperative newsvendor games with horizontal inventory interactions," Omega, Elsevier, vol. 92(C).
    4. Qingren He & Taiwei Shi & Botao Liu & Wanhua Qiu, 2022. "The Ordering Optimization Model for Bounded Rational Retailer with Inventory Transshipment," Mathematics, MDPI, vol. 10(7), pages 1-16, March.
    5. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nils Rudi & Sandeep Kapur & David F. Pyke, 2001. "A Two-Location Inventory Model with Transshipment and Local Decision Making," Management Science, INFORMS, vol. 47(12), pages 1668-1680, December.
    2. Jan A. Van Mieghem & Nils Rudi, 2002. "Newsvendor Networks: Inventory Management and Capacity Investment with Discretionary Activities," Manufacturing & Service Operations Management, INFORMS, vol. 4(4), pages 313-335, August.
    3. Agrell, P.J.Per J. & Lindroth, Robert & Norrman, Andreas, 2004. "Risk, information and incentives in telecom supply chains," International Journal of Production Economics, Elsevier, vol. 90(1), pages 1-16, July.
    4. Amiya K. Chakravarty & Jun Zhang, 2007. "Lateral capacity exchange and its impact on capacity investment decisions," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(6), pages 632-644, September.
    5. Serguei Netessine & Nils Rudi, 2006. "Supply Chain Choice on the Internet," Management Science, INFORMS, vol. 52(6), pages 844-864, June.
    6. Xavier Brusset, 2005. "The impact of coordination and information on transport procurement," Microeconomics 0504007, University Library of Munich, Germany.
    7. Çömez-Dolgan, Nagihan & Moussawi-Haidar, Lama & Jaber, Mohamad Y. & Cephe, Ecem, 2022. "Capacitated assortment planning of a multi-location system under transshipments," International Journal of Production Economics, Elsevier, vol. 251(C).
    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. Lingxiu Dong & Erik Durbin, 2005. "Markets for surplus components with a strategic supplier," Naval Research Logistics (NRL), John Wiley & Sons, vol. 52(8), pages 734-753, December.
    10. 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.
    11. 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.
    12. 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.
    13. Qiang Gong, 2008. "Optimal Buy-Back Contracts with Asymmetric Information," International Journal of Management and Marketing Research, The Institute for Business and Finance Research, vol. 1(1), pages 23-47.
    14. Corbett, Charles J. & DeCroix, Gregory A. & Ha, Albert Y., 2005. "Optimal shared-savings contracts in supply chains: Linear contracts and double moral hazard," European Journal of Operational Research, Elsevier, vol. 163(3), pages 653-667, June.
    15. Hongpeng Guo & Zhihao Lv & Junyi Hua & Hongxu Yuan & Qingyu Yu, 2021. "Design of Combined Auction Model for Emission Rights of International Forestry Carbon Sequestration and Other Pollutants Based on SMRA," Sustainability, MDPI, vol. 13(20), pages 1-18, October.
    16. Paul Pezanis-Christou & Abdolkarim Sadrieh, 2003. "Elicited bid functions in (a)symmetric first-price auctions," Working Papers 85, Barcelona School of Economics.
    17. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2012. "Overbidding in fixed rate tenders: The role of exposure risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 539-549.
    18. Tafreshian, Amirmahdi & Masoud, Neda, 2022. "A truthful subsidy scheme for a peer-to-peer ridesharing market with incomplete information," Transportation Research Part B: Methodological, Elsevier, vol. 162(C), pages 130-161.
    19. Bogetoft, Peter & Nielsen, Kurt, 2003. "Yardstick Based Procurement Design In Natural Resource Management," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa 25910, International Association of Agricultural Economists.
    20. Shunda, Nicholas, 2009. "Auctions with a buy price: The case of reference-dependent preferences," Games and Economic Behavior, Elsevier, vol. 67(2), pages 645-664, November.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:navres:v:57:y:2010:i:4:p:342-353. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1520-6750 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.