Ph.D Student | Naseraldin Hussein |
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Subject | Supply Chain Design on a Line with Lateral Transshipments |

Department | Department of Industrial Engineering and Management |

Supervisor | Professor Yale Herer |

In this study, we propose a simultaneous approach that combines strategic and operational decisions. The environment we investigate is comprised of retail outlets and customers in an infinite horizon setting. Both retail outlets and customers are located on a homogenous finite line segment. The customers pose a normally distributed demand. We analyze this system from a cost-based viewpoint, which incorporates fixed, holding, shortage, transshipments, and delivery costs. The fixed cost captures the periodic cost associated with operating a retail outlet regardless of the business volume, e.g., a rental cost. The holding and shortage costs are the expected periodic inventory overage and underage costs. The transshipment cost is the expected periodic cost of lateral transshipments. The delivery cost is the expected periodic cost of supplying the demand to the customers.

Managing such a system entails making various decisions of different planning horizons. Decisions such as the number and location of retail outlets are part of the strategic design of a supply chain. These decisions affect the long-term horizon. Decisions such as determining the inventory replenishment levels and the lateral transshipment quantities are part of the operational planning of a supply chain. These decisions affect the short-term horizon. We show that integrating these decisions significantly improves the total expected cost of operating the system.

We integrate the decisions of number and location of retail outlets with the decisions of replenishment levels and lateral transshipment quantities into a single model. We tackle the problem gradually starting with a two retail outlet problem that does not practice lateral transshipments. We model the decisions of number and location of retail outlets with replenishment levels decision. We investigate the interaction between the strategic and operational decisions. We examine the impact that an integrated approach in decision-making has on the solution and objective spaces. We quantify the advantage in terms of the problem and cost parameters. Then we investigate the same system yet, with lateral transshipments. We add to the above-mentioned set of decisions another operational decisions namely, lateral transshipment quantities. We explore the asymptotic behavior of this system when the lateral transshipment cost approaches either zero or the sum of the holding and shortage costs. Afterwards, we investigate the advantages of practicing lateral transshipment both on the solution and objective spaces. We conclude with pointing out managerial insights and listing some future research opportunities.