The Multi-Location Transshipment Problem with Positive Replenishment Lead Times

Transshipments, monitored movements of material at the same echelon of a supply chain, represent an effective pooling mechanism. With a single exception, research on transshipments overlooks replenishment lead times. The only approach for two-location inventory systems with non-negligible lead times could not be generalized to a multi-location setting, and the proposed heuristic method cannot guarantee to provide optimal solutions. This paper uses simulation optimization by combining an LP/network flow formulation with infinitesimal perturbation analysis to examine the multi-location transshipment problem with positive replenishment lead times, and demonstrates the computation of the optimal base stock quantities through sample path optimization. From a methodological perspective, this paper deploys an elegant duality-based gradient computation method to improve computational efficiency. In test problems, our algorithm was also able to achieve better objective values than an existing algorithm.Transshipment;Infinitesimal Perturbation Analysis (IPA);Simulation Optimization

Multilocation Inventory Systems With Centralized Information.

The management of multi-echelon inventory systems has been both an important and challenging research area for many years. The rapid advance in information technology and the emphasis on integrated supply chain management have new implications for the successful operation of distribution systems. This research focuses on the study of some fundamental issues related to the operation of a multilocation inventory system with centralized information. First, we do a comparative analysis to evaluate the overall performance of individual versus centralized ordering policies for a multi-store distribution system where centralized information is available. This study integrates the existing research and clarifies one of the fundamental questions facing inventory managers today: whether or not ordering decisions should be centralized. Next, we consider a multi-store distribution system where emergency transshipments are permitted among these stores. Based on some simplifying assumptions, we develop an integrated model with a joint consideration of inventory and transshipment components. An approximately optimal (s, S) policy is obtained through a dynamic programming technique. This ordering policy is then compared with a simplified policy that assumes free and instantaneous transshipments. We also examine the relative performance of base stock policies for a centralized-ordering distribution system. Numerical studies are provided to give general guidelines for use of the policies

The Multi-Location Transshipment Problem with Positive Replenishment Lead Times

Transshipments, monitored movements of material at the same echelon of a supply chain, represent an effective pooling mechanism. With a single exception, research on transshipments overlooks replenishment lead times. The only approach for two-location inventory systems with non-negligible lead times could not be generalized to a multi-location setting, and the proposed heuristic method cannot guarantee to provide optimal solutions. This paper uses simulation optimization by combining an LP/network flow formulation with infinitesimal perturbation analysis to examine the multi-location transshipment problem with positive replenishment lead times, and demonstrates the computation of the optimal base stock quantities through sample path optimization. From a methodological perspective, this paper deploys an elegant duality-based gradient computation method to improve computational efficiency. In test problems, our algorithm was also able to achieve better objective values than an existing algorithm

Virtual transshipments and revenue-sharing contracts in supply chain management

This dissertation presents the use of virtual transshipments and revenue-sharing contracts for inventory control in a small scale supply chain. The main objective is to maximize the total profit in a centralized supply chain or maximize the supply chain\u27s profit while keeping the individual components\u27 incentives in a decentralized supply chain. First, a centralized supply chain with two capacitated manufacturing plants situated in two distinct geographical regions is considered. Normally, demand in each region is mostly satisfied by the local plant. However, if the local plant is understocked while the remote one is overstocked, some of the newly generated demand can be assigned to be served by the more remote plant. The sources of the above virtual lateral transshipments, unlike the ones involved in real lateral transshipments, do not need to have nonnegative inventory levels throughout the transshipment process. Besides the theoretical analysis for this centralized supply chain, a computational study is conducted in detail to illustrate the ability of virtual lateral transshipments to reduce the total cost. The impacts of the parameters (unit holding cost, production cost, goodwill cost, etc.) on the cost savings that can be achieved by using the transshipment option are also assessed. Then, a supply chain with one supplier and one retailer is considered where a revenue-sharing contract is adopted. In this revenue-sharing contract, the retailer may obtain the product from the supplier at a less-than-production-cost price, but in exchange, the retailer must share the revenue with the supplier at a pre-set revenuesharing rate. The objective is to maximize the overall supply chain\u27s total profit while upholding the individual components\u27 incentives. A two-stage Stackelberg game is used for the analysis. In this game, one player is the leader and the other one is the follower. The analysis reveals that the party who keeps more than half of the revenue should also be the leader of the Stackelberg game. Furthermore, the adoption of a revenue-sharing contract in a supply chain with two suppliers and one retailer under a limited amount of available funds is analyzed. Using the revenue-sharing contract, the retailer pays a transfer cost rate of the production cost per unit when he obtains the items from the suppliers, and shares the revenue with the suppliers at a pre-set revenue-sharing rate. The two suppliers have different transfer cost rates and revenue-sharing rates. The retailer will earn more profit per unit with a higher transfer cost rate. How the retailer orders items from the two suppliers to maximize his expected profit under limited available funds is analyzed next. Conditions are shown under which the optimal way the retailer orders items from the two suppliers exists

Supply Chain

Traditionally supply chain management has meant factories, assembly lines, warehouses, transportation vehicles, and time sheets. Modern supply chain management is a highly complex, multidimensional problem set with virtually endless number of variables for optimization. An Internet enabled supply chain may have just-in-time delivery, precise inventory visibility, and up-to-the-minute distribution-tracking capabilities. Technology advances have enabled supply chains to become strategic weapons that can help avoid disasters, lower costs, and make money. From internal enterprise processes to external business transactions with suppliers, transporters, channels and end-users marks the wide range of challenges researchers have to handle. The aim of this book is at revealing and illustrating this diversity in terms of scientific and theoretical fundamentals, prevailing concepts as well as current practical applications