Lateral Transshipment Research Articles

Simulation-based lateral transshipment policy optimization for s, S inventory control problem in a single-echelon supply chain network

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.

Production planning with transshipment in a global supply chain under different carbon trading mechanisms

To cope with the supply-demand mismatch in the global market, transnational enterprises usually adopt the strategy of lateral transshipment. This paper studies the production planning, transshipment and carbon trading problem of a large transnational manufacturer in a global supply chain. Two countries are involved in the operation of the transnational manufacturer, where different carbon trading mechanisms are implemented. Operational decisions of the transnational manufacturer are optimized in a mixed integer programming model with the purpose of maximizing its total profit. Then, we analyze the influence of the difference between carbon trading mechanisms on the transnational manufacturer, retailers, the countries involved and the global supply chain. Theoretically, our research enriches the research streams of lateral transshipment and carbon cap-and-trade policy. Moreover, managerial insights are provided for global supply chain members and international emission reduction regulators, which contribute to the smooth operation of global supply chains and enhance emission reduction. Especially, the conditions under which local governments should emphasize on economic development or environmental protection are revealed.

Distribution planning for multi-echelon networks considering multiple sourcing and lateral transshipments

Nowadays, due to the increasing complexity of business environment, especially demand uncertainty, supply chain managers need to establish more-effective sourcing and distribution strategies to ensure high customer service and low stock costs. To overcome this challenge multi-echelon network structures and alternative distribution strategies such as lateral transshipments and multiple sourcing should be considered in inventory optimisation models. In this article, we propose a scenario-based modelling approach to solve a two-stage multi-echelon inventory optimisation problem with a non-stationary demand. The model is based on a distribution requirements planning (DRP) approach and minimises the expected total cost that is composed of the fixed allocation, inventory holding, procurement, transportation, and back-ordering costs. Alternative inventory optimisation models, including the lateral transshipment strategy and multiple sourcing, are thus built, and the corresponding stochastic programmes are solved using the sample average approximation method. Through a numerical investigation conducted with several generated instances and an empirical investigation based on the case of a major French retailer’s distribution network, we show the substantial benefit of lateral transshipments and multiple sourcing in reducing the expected total costs of the distribution network.

The order and transshipment decisions in a two-location inventory system with demand forecast updates

To improve profitability and reduce demand uncertainty, lateral transshipment is employed in this study to reallocate inventory with updated demand information. A decentralized inventory system with two retailers ordering from one common supplier is analyzed. Each retailer places the order independently before the selling season begins based on original demand forecast. As lead time elapses, more information is collected to update the demand forecast and transshipment is examined. This study constructs a two-stage model and applies backward induction to solve the problem. A threshold transshipment policy is proposed at stage 2. The existence of unique Nash equilibrium is proven at stage 1. Both the centralized system with transshipment and the newsvendor-like system without transshipment are studied as benchmarks to evaluate the performance of transshipment in the decentralized system. Extensive numerical examples are conducted to provide some valuable management implications. The results show that transshipment can lead to profit increase, especially in the system with high informative value of demand forecast updates.

A Multi Echelon Location-Inventory Model with Lateral Transshipment

A Multi Echelon Location-Inventory Model with Lateral Transshipment

Itemized platelet supply chain with lateral transshipment under uncertainty evaluating inappropriate output in laboratories

Demand uncertainty coupled with the short lifespan of itemized platelets has caused a significant shortage at public therapeutic centers. In this regard, this paper presents a multi-objective robust stochastic mixed integer linear programming model for an integrated platelet supply chain considering unidirectional lateral transshipment between hospitals and clinics. In the proposed model, platelets are divided into typical, irradiated and washed platelets with lifespan differentiated for various types of patients. This model evaluates the risk of inappropriate production by concentrating on three different procedures for extracting platelet, including apheresis, platelet rich plasma and buffy coat methods. In this investigation, staff errors, laboratory hygiene and device failure, as well as donors' blood contamination, are considered for obtaining the function of inappropriate production rate. In our model, the logistics costs are considered as the first objective and the maximum unsatisfied demand as the second objective, both also to be minimized. To tackle demand uncertainty, a robust stochastic approach is then developed. Afterwards, to create a more realistic model, the Monte Carlo sampling approach is used for generating required scenarios. Finally, some managerial insights are provided through a real case study to evaluate the applicability of the presented model. The results indicate that the proposed model not only improves the demand satisfaction but also reduces the risk of itemized platelets wastage.

Lateral transshipment and expedited shipping in disruption recovery: A mean-CVaR approach

Lateral transshipment and expedited shipping are the sourcing flexibility strategies that are employed to reduce inventory cost and increase service level. In this context, this study investigates the effects of lateral transshipment and expedited shipping on supply chain performance in presence of disruptions. A retail system with multiple distribution centers and multiple retailers is considered in this study. To determine the ordering policy parameters for the retailers, a simulation-based optimization approach is developed. The proposed approach considers both average supply chain cost and the worst-case supply chain cost. Moreover, decision maker’s risk attitude is modeled in the objective function as a trade-off between the average supply chain cost and the worst-case supply chain cost. In the computational experiments, two alternative system configurations, which are characterized by lateral transshipment and lateral transshipment and expediting, are compared with the base-case configuration with no sourcing flexibility. The results reveal that lateral transshipment is a cost-efficient stock-out risk mitigation strategy. Therefore, it is preferable for risk-moderate decision makers. On the other hand, for the systems with tight service level objectives, expedited shipping can be preferred since it is an effective stock-out risk mitigation strategy despite the high average supply chain cost.

Cost optimization of the supply chain network using genetic algorithms - Withdrawn

This paper presents a joint optimization of supply chain network in which supplier selection, lateral transshipment, and vehicle routing are involved. The objective regarded in this problem is to: (a) select one or more suppliers to order and replenish different types of products in order to minimize the total ordering cost spent by a wholesaler, (b) maximize the sum of maximum savings of different products, and (c) find the best sequence of delivering various kinds of products to different retailers in order to minimize the total cost due to the total traveled distance of a vehicle and due to the total time required for a vehicle to serve retailers. We propose to use a stochastic search technique called fuzzy logic guided genetic algorithms (FLGA) to solve the problem. The role of fuzzy logic is to dynamically adjust the crossover rate and mutation rate after each ten consecutive generations instead of two used in the past. In order to demonstrate the effectiveness of the FLGA, several search methods, branch and bound, standard GA, simulated annealing, and tabu search, are utilized to compare with the FLGA through simulations. Results show that the FLGA outperforms other search methods in all of three considered scenarios.

Research on Configuration Optimization of Civil Aircraft Spare Parts with Lateral Transshipments and Maintenance Ratio

A research method for multi-echelon inventory allocation of civil aircraft spare parts with lateral transshipments and maintenance ratio is proposed in this paper, and the maintenance rate is considered into the inventory model, aiming at the problem of multi-echelon inventory allocation with lateral transshipments for civil aircraft spare parts. Firstly, the principle of the multi-echelon inventory model with lateral transshipments and maintenance ratio is proposed. Then, by considering the fleet availability and the satisfaction ratio as the constraints, a mathematical model is built with the inventory system total cost as the optimization objective. Secondly, the procedure of solving multi-echelon inventory allocation model considering the influence of lateral transshipments and maintenance ratio is discussed based on the marginal analysis method. Finally, some components of Boeing 737 are selected as the research objects, the multi-echelon inventory allocation is investigated by considering lateral transshipments and maintenance ratio. The analysis results in this paper show the best number of multi echelon inventory allocation, the minimum inventory system total cost and the fleet availability are 1.205 million dollars and 0.9909 respectively. Comparing the traditional inventory model without considering lateral transshipments and maintenance ratio, and the model which only considers the maintenance ratio, the results indicate that the model offered in this paper could reduce the total cost of inventory system significantly, and provides theoretical support and method guidance for the accurate allocation of multi echelon inventory optimization for civil aircraft spare parts.

A Multi-Product Production/Distribution System Design Problem with Direct Shipments and Lateral Transshipments

In this paper, we investigate a multi-product, three-stage production/distribution system design problem (PDSD) with direct shipment and lateral transshipment capabilities. Our overall goal is to find the most efficient network design to minimize the total fixed facility and transportation costs. Specifically, we locate p capacitated distribution centers in the second stage from a set of candidate locations. At the same time, our design allows for direct shipments between first (suppliers) and third stages (customers) and lateral transshipments among the distribution centers in the second stage. The PDSD problem is known to be NP-hard, and prior studies have explored several heuristic methods including scatter search, tabu search, and genetic algorithms to solve the problem. In this paper, we propose two solution algorithms based on simulated annealing and GRASP heuristics. We apply both long-term and short-term memory lists to maintain an efficient local search, combined with a custom greedy solver that can effectively evaluate the quality of a solution candidate. We conduct a series of computational experiments to validate the proposed algorithms. Compared with the optimal solution, the simulated annealing algorithm presents an average optimality gap of 0.07% and an average time of 25.56% of optimal solution time, while the GRASP algorithm achieves a solution gap of 0.11% with 17.85% of optimal running time. The experimental results also show that the simulated annealing and GRASP algorithms outperform the best-reported heuristic in the literature based on scatter search regarding both solution quality and duration, especially for large-scale problem instances with tighter capacities.

A graph theory-based algorithm for a multi-echelon multi-period responsive supply chain network design with lateral-transshipments

A key decision in design of a supply chain is the configuration of the network. In this study, supply chain network design problem is investigated and an efficient solution approach is presented. Specifically, a heuristic graph theoretic-based algorithm is proposed for solving a multi-echelon responsive supply chain network design problem with lateral-transshipment among retailers. The possibility of lateral-transshipment is considered to increase the customer satisfaction by increasing the availability of the goods, and to reduce total inventory handling costs. Consideration of lateral transshipment provides a trade-off between transportation costs and inventory handling costs at the retailers. Graph theory is used to investigate and study the structure of the supply chain network and it is shown that the network can be reduced to a k-partite graph. The performance of the proposed approach is compared with an exact commercial solver on test problems. The results indicate that the proposed algorithm generates high-quality solutions in a reasonable time in comparison with the exact solver.

Evaluation of two transshipment policies in a two-location decentralized inventory system under partial backordering

This research investigates the replenishment and transshipment decisions in a two-retailer inventory system with a single selling season. Both emergency lateral transshipment (ELT) and preventive lateral transshipment (PLT) are investigated. ELT satisfies partial backordering. We prove the existence of unique Nash equilibrium for the system under each policy. The results show that the ELT solution is independent of the transshipment price while the PLT solution converges to the newsvendor solution as the transshipment price increases. Numerical analysis is presented to illustrate the advantage of each policy. This study assists retailers in deciding which transshipment policy should be preferred.

수평보급을 고려한 다단계-다계층 재고모형의 효과분석

The MIME (Multi-Indenture & Multi-Echelon) model determines the optimal inventory level of a recoverable stock on the multi-indenture and multi-echelon repair system. The MIME model has many assumptions, one of which does not allow lateral transshipment. This study presents two MIME models that allow lateral transshipment. While a model 1 is based on the Lee’s lateral transshipment study, a model 2 is derived from Sherbrooke’s studies. A simulation model is developed to compare the validity of two MIME models with lateral transshipment. We analyze the effect of lateral transshipment models by comparing the Vari-METRIC (Multi-Echelon Technique for Recoverable Item Control) model. Also, we analyze how lateral transshipment time can affect the expected back order. As a result of experimentation, a performance of model 2 is relatively better. An expected back order decreased when lateral transshipment was allowed. The longer the lateral transshipment time, the lower the effect of lateral transshipment is.

Dynamic Complexities in a Supply Chain System with Lateral Transshipments

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.

Optimal lateral transshipment policies for a two location inventory problem with multiple demand classes

We consider an inventory model for spare parts with two stockpoints, providing repairable parts for a critical component of advanced technical systems. As downtime costs for these systems are expensive, ready–for–use spare parts are kept in stock to be able to quickly respond to a breakdown of a system. We allow for lateral transshipments of parts between the stockpoints upon a demand arrival. Each stockpoint faces demands from multiple demand classes. We are interested in the optimal lateral transshipment policy. There are three ways in which a demand can by satisfied: from own stock, via a lateral transshipment, or via an emergency procedure. Using stochastic dynamic programming, we characterize and prove the structure of the optimal policy, that is, the policy for satisfying the demands which minimizes the average operating costs of the system. This optimal policy is a threshold type policy, with state-dependent thresholds at each stockpoint for every demand class. We show a partial ordering in these thresholds in the demand classes. In addition, we derive conditions under which the so-called hold back and complete pooling policies are optimal, two policies that are often assumed in the literature. Furthermore, we study several model extensions which fit in the same modeling framework.

Stabilization of two-echelon supply networks with uncertain demand, multiple delays and switching topology using robust control

In this paper, a two-level supply network (SN) system composed of multiple retailers and multiple distributors is developed. The dynamic equations for each echelon are described individually considering the varying possibility of vertical and lateral transshipment of product. Then a SN model is formulated with switched topologies, multiple time-varying delays and uncertain customer demand. By use of the switched Lyapunov stability theory and the average dwell time approach, sufficient conditions of linear matrix inequalities is proposed for the existence of robust $$\hbox {H}\infty $$ state feedback controller. This control strategy guarantee the reduction of inventory levels, delivery rates and orders fluctuations under the worst fluctuation of demand as well as the mitigation of the bullwhip effect (BE). A real case example is presented to demonstrate the effectiveness of the proposed inventory control. The simulation proves that proportionality between vertical and lateral delays as well as cooperation rates have significant impacts on the achievement of best tradeoff between improving inventory dynamics and reducing order fluctuations.

Distribution of Medication Considering Information, Transshipment, and Clustering: Malaria in Malawi

Malaria is a major health concern for many developing countries. Designing strategies for efficient distribution of malaria medications, such as Artemesinin Combination Therapies, is a key challenge in resource constrained countries. This paper develops a solution methodology that integrates strategic‐level and tactical‐level models to better manage pharmaceutical distribution through a three‐tier centralized health system, which is common to sub‐Saharan African countries. At the strategic level, we develop a two‐stage stochastic programming approach to address the problem of demand uncertainty. In the first stage, an initial round of shipments is sent before the malaria season to each local clinic from district hospitals, which receive medications from regional warehouses. After the malaria season begins, a recourse action is triggered to avoid shortages in the form of (i) lateral transshipment or (ii) delayed shipment. The optimal solutions developed by the strategic model identify small clinic clusters possessing exclusive transshipment policies. Therefore, we decompose the problem at the tactical level, solving each clinic cluster independently using a Markov decision process approach to determine optimal periodic transshipment policies. A case study of our proposed distribution system is performed for 290 facilities controlled by the Malawi Ministry of Health. Numerical analysis of Malawi's distribution system indicates that our proposed cluster‐based decomposition method could near optimally reduce shortage incidents. Moreover, such an approach is robust to challenges of developing countries such as slow paper‐based inventory review, uncertain transportation infrastructure, the need for equitable distribution, and seasonal and correlated demand associated with malaria transmission dynamics.

An age-based lateral-transshipment policy for perishable items

Lateral transshipment is an efficient policy designed to improve the performance of a supply chain. Despite the importance of transshipment for perishable items, few studies consider the issue of perishability. Currently, transshipment in some blood supply chains is based on the age profile of units in hospitals. However, decisions such as the age threshold are made empirically and are fixed for all hospitals. In this paper, we propose a new transshipment policy for perishable items based on the age of the oldest item in the system to improve supply-chain performance. The proposed model has applications for transshipping blood units between hospitals. We develop a heuristic solution using partial differential equations to compute performance measures and cost function. The results demonstrate that our transshipment policy is effective under various circumstances such as lost sale and backordering. We also compare the performance of the suggested transshipment policy to the transshipment policy that is currently practiced in some Australian hospitals (which is an aged based proactive transshipment policy with an empirically set threshold). The results demonstrate that by setting the optimal threshold, hospitals could transfuse units with the same average age of the current policy, while reducing their total inventory cost by approximately 61%.

A pragmatic decision model for inventory management with heterogeneous suppliers

ABSTRACTFor enterprises, it is imperative that the trade-off between the cost of inventory and risk implications is managed in the most efficient manner. To explore this, we use the common example of a wholesaler operating in an environment where suppliers demonstrate heterogeneous reliability. The wholesaler has partial orders with dual suppliers and uses lateral transshipments. While supplier reliability is a key concern in inventory management, reliable suppliers are more expensive and investment in strategic approaches that improve supplier performance carries a high cost. Here we consider the operational strategy of dual sourcing with reliable and unreliable suppliers and model the total inventory cost where the likely scenario lead-time of the unreliable suppliers extends beyond the scheduling period. We then develop a Customized Integer Programming Optimization Model to determine the optimum size of partial orders with multiple suppliers. In addition to the objective of total cost optimization, this study takes into account the volatility of the cost associated with the uncertainty of an inventory system.

Closed-loop supply chain network design under disruption risks: A robust approach with real world application

Abstract In today’s globalized and highly uncertain business environments, supply chains have become more vulnerable to disruptions. This paper presents a stochastic robust optimization model for the design of a closed-loop supply chain network that performs resiliently in the face of disruptions. The proposed model is capable of considering lateral transshipment as a reactive strategy to cope with operational and disruption risks. The objective is to determine facility location decisions and lateral transshipment quantities that minimize the total supply chain cost across different disruption scenarios. A Lagrangian relaxation algorithm is developed to solve the robust model efficiently. Important managerial insights are obtained from the model implementation in a case study of glass the industry.