USING SIMULATION TO EVALUATE THE PERFORMANCE OF TRANSSHIPMENT POLICIES WITHIN TWO ECHELONS

Abstract

ABSTRACT Transshipments refer to a variety of actions that can result in the sharing of inventory among locations, possibly at different levels of the supply chain. The implementation of transshipment can minimize the cost while maintaining a certain service. It is common for a distributor to use several retailers of different locations to transship its products throughout a region. Therefore, the selection of effective transshipment rules in multi-location inventory systems is important for a successful retail sector. Our research is motivated by observations from various industries such as apparel, fashion goods, and toys, particularly by those retailers with brick and click outlets. The objective of this study is to evaluate a variety of transshipment policies via simulation. A simulation model is used to evaluate the performance of various transshipment policies in corporation with two inventory control policies. According to the numerical experiment results, some managerial implications are suggested. The main findings of this study is that using lateral transshipment in corporation with (Q,R) and (R,s,S) policies inventory policies can result in lower cost and high service level. Furthermore, the (R,s,S)policy is more effective than (Q,R) policy when transshipment policy is applied for the set of circumstances under investigation. The same methodology and modeling approach used in this study could be applied to various supply chains of products with the similar characteristics.