Abstract
Since it affects the performance of whole supply chain significantly, definition of correct inventory control policy in a supply chain is critical. Recent technological development enabled real time visibility of a supply network by horizontal integration of each node in a supply network. By this opportunity, inventory sharing among stocking locations is also possible in the effort of cost minimization in supply chain management. Hence, lateral transshipment gained popularity and studies seeking the best lateral-transshipment policy is still under research. In this study, we aim to compare different lateral-transshipment policies for an s, S inventory control problem for a single-echelon supply chain network system. In this work, we consider a supply network with three stocking locations which may perform lateral transshipment among them when backorder takes place. We develop the simulation models of the systems in ARENA 14.5 commercial software and compare the performance of the policies by minimizing the total cost under a pre-defined fill rate constraint by using an optimization tool, OptQuest, integrated in that software. The results show that lateral transshipment works well compared to the scenario when there is no lateral transshipment policy in the network.
Highlights
Because it affects performance of the whole chain significantly, inventory control policy in a supply chain is important
Si : safety stock level of stocking location i; Si : up-to-level of stocking location i; nmit : number of trucks sent from the main depot to the stocking location i, at time t, nijt : number of transporters sent from stocking location i to j, at time t, Qit : order quantity of stocking location i, from the main depot at the end of time t, qijt : amount of lateral transshipment from stocking location i to stocking location j, at time t, It should be noticed that in an inventory model, the a stocking location i places an order whenever its inventory level (Iit) decreases to a level less than the reorder level, si
To find out the optimal levels of si, Si, we considered the minimization of total cost as objective function
Summary
Because it affects performance of the whole chain significantly, inventory control policy in a supply chain is important. Companies tend to carry inventory in practice, to reduce their total cost and improve their customer service. For providing an effective mechanism, transshipments are being made between stocking locations at the same echelon based on their available inventories and their distances to increase the efficiency of the network. Allowing transshipments between stocking locations may lead cost reduction as well as service improvement resulting with customer satisfaction. We study a single-echelon supply chain network by focusing on determining the best lateral-transshipment policy from four pre-defined ones. There are three stocking locations (depots) in which they have their own demand profiles. We ignore the lead times for lateral transshipments, we consider a cost for these transshipments
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