Allocation rules for joint replenishment and inventory sharing via transshipment

Abstract

The product life cycle is getting shorter because of the acceleration of product upgrading. The mismatch between the demand of short life cycle product and inventory leads to high cost owing to demand uncertainty and forecast inaccuracy. In order to reduce cost, the paper considers several retailers jointly replenish inventory and share inventory via transshipment after demand have realized. Based on cooperative game theory, the paper designs cost allocation rule of joint replenishment and profit allocation rule of inventory sharing for retailers. And it prove that the cost allocation is core allocation when their holding cost are same and the profit allocation is value-preserve in the given condition of the paper. Finally, we analyze the effects of transshipment on replenishment activities in view of profit allocation rule and the paper presents an example which shows that the coalition can benefit from transshipment by regulating their inventory level if the holding cost of retailers vary widely and the cost of transshipment is low.