The Multi-Location Transshipment Problem with Positive Replenishment Lead Times

Yeming Gong and E. Yucesan

ERIM Report Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam

Abstract: 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.

Keywords: Infinitesimal Perturbation Analysis (IPA); Simulation Optimization; Transshipment (search for similar items in EconPapers)
JEL-codes: C61 M M11 R4 R41 (search for similar items in EconPapers)
Date: 2006-09-07
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Citations: View citations in EconPapers (4)

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