|M.Sc Thesis||Department of Industrial Engineering and Management|
|Supervisor:||Assoc. Prof. Herer Yale|
Lateral stock transshipment is the monitored movement of stock between locations at the same echelon level. This movement allows cost reductions and improved service levels without increasing inventory.
We refer to emergency lateral transshipment that is performed after the demand has been realized and before it has been satisfied. Demand is assumed to be stochastic and normally distributed at each location. We discuss the cost identical infinite horizon multi-location transshipment problem when the capacity at the supplier is limited. Holding, shortage and transshipment costs will be considered identical at all locations.
In our system we have one supplier at the higher level of the supply chain and several locations at the same lower level. These locations are independent each has identically distributed demand over time and can transship inventory among themselves in order to reduce costs.
Replenishment and transshipment lead times are considered negligible. Our model is a special case of the working paper "Multi-location transshipment problem with capacitated production" (Ozdemir et al., 2011).
We will examine a modified order-up-to S policy for this problem since a traditional order-up-to S policy is not feasible with finite supply. If the total order quantity required to bring all locations to their order-up-to level is greater than the available supply, a shortfall will occur at some locations. As a result, allocation rules are needed to distribute this limited supply among the different locations. Our objective in this research is to find order-up-to S levels that minimize the total expected periodic cost in the cost-identical multi-location transshipment problem with a finitely capacitated supplier. We develop an algorithm to find a low cost solution for the transshipment problem presented.