Abstract
The horizontal interaction between retailers, coupled with replenishment rules and time delays, makes the dynamics in supply chain systems highly complicated. This paper aims to explore the impacts of lateral transshipments on the stability, bullwhip effect, and other performance measurements in the context of a two-tiered supply chain system composed of one supplier and two retailers. In particular, we developed a unified discrete-time state space model to address two different scenarios of placing orders. Analytical stability results are derived, through which we found that inappropriate lateral transshipment policies readily destabilize the supply chain system. Moreover, the lead time of lateral transshipments further complicates the stability problem. Theoretical results are validated through simulation experiments and the influences of system parameters on performance measures are investigated numerically. Numerical simulations show that lateral transshipments help improve the customer service level for both retailers. It is also interesting to observe that the demand of the two retailers can be satisfied even if only one retailer places orders from the upstream supplier.
Highlights
The dynamics of a supply chain system has grown increasingly complicated due to numerous factors, such as global economic downturn, e-commerce development, and disruptive events
This paper aims to explore the impacts of lateral transshipments on the stability, bullwhip effect, and other performance measurements in the context of a two-tiered supply chain system composed of one supplier and two retailers
The most critical contribution of this research lies in our provision of both delay-dependent and delay independent stability conditions through analytical study, from which we show that lateral transshipments make the dynamics of supply chain systems more complicated
Summary
The dynamics of a supply chain system has grown increasingly complicated due to numerous factors, such as global economic downturn, e-commerce development, and disruptive events. To reduce the ordering cost, stock-out cost, and inventory holding cost, the retailers in such industries may satisfy customer demand just by lateral transshipments from nearby retailers without placing orders with upstream suppliers. The most critical contribution of this research lies in our provision of both delay-dependent and delay independent stability conditions through analytical study, from which we show that lateral transshipments make the dynamics of supply chain systems more complicated. These theoretical results are significant for the selection of both replenishment parameters and later transshipment parameters in achieving better performance.
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