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A location‐inventory model with lateral transshipments

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  • Hussein Naseraldin
  • Yale T. Herer

Abstract

We study an infinite horizon periodic stochastic inventory system consisting of retail outlets and customers located on a homogenous line segment. In each period, the total demand, generated by the customers on the line, is normally distributed. To better match supply and demand, we incorporate lateral transshipments. We propose a compact model in which the strategic decisions—the number and locations of retail outlets—are determined simultaneously with the operational decisions—the inventory replenishment and transshipment quantities. We find the optimal balance between the risk‐pooling considerations, which drive down the optimal number of retail outlets, and lateral transshipments, which drive up the optimal number of retail outlets. We also explore the sensitivity of the optimal number of retail outlets to various problem parameters. This article presents a novel way of integrating lateral transshipments in the context of an inventory‐location model. © 2011 Wiley Periodicals, Inc. Naval Research Logistics, 2011

Suggested Citation

  • Hussein Naseraldin & Yale T. Herer, 2011. "A location‐inventory model with lateral transshipments," Naval Research Logistics (NRL), John Wiley & Sons, vol. 58(5), pages 437-456, August.
    • Handle: RePEc:wly:navres:v:58:y:2011:i:5:p:437-456
    DOI: 10.1002/nav.20461
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    References listed on IDEAS

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    1. Mark Daskin & Collette Coullard & Zuo-Jun Shen, 2002. "An Inventory-Location Model: Formulation, Solution Algorithm and Computational Results," Annals of Operations Research, Springer, vol. 110(1), pages 83-106, February.
    2. Yale T. Herer & Ayelet Rashit, 1999. "Lateral stock transshipments in a two‐location inventory system with fixed and joint replenishment costs," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(5), pages 525-547, August.
    3. Hussein Naseraldin & Yale T. Herer, 2008. "Integrating the Number and Location of Retail Outlets on a Line with Replenishment Decisions," Management Science, INFORMS, vol. 54(9), pages 1666-1683, September.
    4. Stephen C. Allen, 1958. "Redistribution of total stock over several user locations," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 5(4), pages 337-345, December.
    5. Max Shen, Zuo-Jun & Qi, Lian, 2007. "Incorporating inventory and routing costs in strategic location models," European Journal of Operational Research, Elsevier, vol. 179(2), pages 372-389, June.
    6. Zuo-Jun Max Shen & Collette Coullard & Mark S. Daskin, 2003. "A Joint Location-Inventory Model," Transportation Science, INFORMS, vol. 37(1), pages 40-55, February.
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    Cited by:

    1. Bingbing Cao & Tianhui You & Chunyi Liu & Jian Zhao, 2021. "Pricing and Channel Coordination in Online-to-Offline Supply Chain Considering Corporate Environmental Responsibility and Lateral Inventory Transshipment," Mathematics, MDPI, vol. 9(20), pages 1-30, October.
    2. Michael K. Lim & Ho-Yin Mak & Zuo-Jun Max Shen, 2017. "Agility and Proximity Considerations in Supply Chain Design," Management Science, INFORMS, vol. 63(4), pages 1026-1041, April.
    3. Onur Kaya & Dogus Ozkok, 2020. "A Blood Bank Network Design Problem with Integrated Facility Location, Inventory and Routing Decisions," Networks and Spatial Economics, Springer, vol. 20(3), pages 757-783, September.

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