Publication Type

Journal Article

Version

Postprint

Publication Date

10-2015

Abstract

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.

Keywords

Multi-item inventory, Transshipment, Pooling, Markov decision models, Lagrangian relaxation

Discipline

Operations and Supply Chain Management

Research Areas

Operations Management

Publication

Annals of Operations Research

Volume

233

Issue

1

First Page

365

Last Page

381

ISSN

0254-5330

Identifier

10.1007/s10479-013-1483-4

Publisher

Springer Verlag

Additional URL

http://dx.doi.org/10.1007/s10479-013-1483-4

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