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Enhanced lateral transshipments in a multi-location inventory system

Paterson, Colin and Teunter, Ruud and Glazebrook, Kevin (2012) Enhanced lateral transshipments in a multi-location inventory system. European Journal of Operational Research, 221 (2). pp. 317-327. ISSN 0377-2217

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    Abstract

    In managing an inventory network, two approaches to the pooling of stock have been proposed. Reactive transshipments respond to shortages at a location by moving inventory from elsewhere within the network, while proactive stock redistribution seeks to minimize the chance of future stockouts. This paper is the first to propose an enhanced reactive approach in which individual transshipments are viewed as an opportunity for proactive stock redistribution. We adopt a quasi-myopic approach to the development of a strongly performing enhanced reactive transshipment policy. In comparison to a purely reactive approach to transshipment, service levels are improved while a reduction in safety stock levels is achieved. The aggregate costs incurred in managing the system are significantly reduced, especially so for large networks. Moreover, an optimal policy is determined for small networks and it is shown that the enhanced reactive policy substantially closes the gap to optimality.

    Item Type: Article
    Journal or Publication Title: European Journal of Operational Research
    Uncontrolled Keywords: Inventory control ; Lateral transshipments ; Dynamic programming
    Subjects: H Social Sciences > HB Economic Theory
    Departments: Lancaster University Management School > Management Science
    ID Code: 55045
    Deposited By: ep_importer_pure
    Deposited On: 13 Jun 2012 13:35
    Refereed?: Yes
    Published?: Published
    Last Modified: 23 Sep 2013 15:51
    Identification Number:
    URI: http://eprints.lancs.ac.uk/id/eprint/55045

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