We study a two-item two-warehouse periodic review inventory model that allows transshipment between warehouses and emergency orders. The model helps to determine two decisions: (i) the order up to levels for the two items at the two warehouses, and (ii) whether to accept a transshipment request from the other warehouse. The acceptance of a transshipment request in a warehouse depends on the time until the next review epoch and the inventory level of the warehouse. We propose a search procedure, which is a combination of greedy heuristics and a Lagrangian relaxation method, to minimize the total operating cost of the system. Numerical experiments suggest that optimality can be achieved using the proposed procedure. The time threshold to accept a transshipment request in a warehouse increases with the emergency shipment cost. In addition, the more inventory available in the warehouse the more likely for a transshipment request to be accepted.
Multi-item inventory, Transshipment, Pooling, Markov decision models, Lagrangian relaxation
Operations and Supply Chain Management
Annals of Operations Research
RAMAKRISHNA, Koushik; MOOSA, Sharafali; and LIM, Yun Fong.
A two-item two-warehouse periodic review inventory model with transshipment. (2015). Annals of Operations Research. 233, (1), 365-381. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/3545