Dynamic shipments of inventories in shared warehouse and transportation networks

Abstract

In shared warehouse and transportation networks, dynamic shipments of inventories are carried out based on up-to-date inventory information. This paper studies the effect of network structures on optimal decision-making. We propose a discrete time modeling framework with stochastic demand, capturing a wide variety of network structures. Using Markov decision processes, we obtain optimal order and dynamic shipment decisions for small networks. We compare optimal solutions of different four-node network structures. Results indicate product characteristics significantly influence the effectiveness of network structures. Surprisingly, two-echelon networks are occasionally costlier than any other network. Moreover, dynamic shipments yield considerable gains over static shipments.