Abstract
Manufacturers and wholesalers are increasingly cost conscious in response to today’s hyper-competitive environment. Lateral transshipment (LT) has been proposed as a viable solution to drive total inventory costs down whilst increasing customer service level. Our study proposes five LT decision rules with a case-based roadmap to guide professional inventory management. Results of this large fast moving consumer goods case study company demonstrate superior inventory management performance with implementing a combined reactive and proactive LT strategy to determine whether to transship emergency stock from other warehouse or to backorder from suppliers, size of transshipment, favorite wholesaler, preferred supplier, and extra quantity for preventive LT, which are the key LT decision points among the professional supply chain management practitioners.
Highlights
Due to increasing market competition, manufacturers and wholesalers are becoming more cost conscious and responsive to the changing market needs
Wholesalers usually increase the flexibility in their inventory systems by adopting a mix of emergency lateral transshipment (LT) from other warehouses at a higher cost, while at the same time backordering from their usual suppliers to match the stochastic demand
Though holding costs can decrease as a result, there is a possibility that its inventory position may occasionally become negative
Summary
Due to increasing market competition, manufacturers and wholesalers are becoming more cost conscious and responsive to the changing market needs. The resulting surge in the risk of stock outages and substandard customer service level make the cost saving in lower inventory level problematic to justify. To manage these adversities, manufacturers and Manuscript first received/Recebido em: 23/12/2015 Manuscript accepted/Aprovado em: 28/03/2016. Under the periodic review policy, the unsatisfied demands in the previous period, the inventory position and the expected demand in the current period are analyzed for planning orders at the beginning of the period. Though holding costs can decrease as a result, there is a possibility that its inventory position may occasionally become negative One possible solution is to apply LT from other wholesalers with surplus stock to replenish wholesaler with stock deficiency within a short period of time
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