The "Lateral Transshipment" Is a Cooperative Tool for Optimizing the Profitability of a Distribution System

Fadoi Elleuch

International Journal of Finance, Insurance and Risk Management, 2023, vol. 13, issue 1, 128-151

Abstract: Purpose: In this article, we analyze a network consisting of a distribution center (or central depot) and two retailers who serve customers. This analysis makes it possible to assess the effect of emergency transshipment both at the level of the Average Global Profit and of the Average Global Service level. Design/Methodology/Approach: We are targeting to improve the global profitability of stock system composed of two retailers by minimizing the Desservice rate of each site by decreasing the quantity out of stock. This result in the improvement of the Average Global Profit in the whole inventory system this can be done by applying the cooperation between these retailers which is called by the transshipment, either by the application of the policy of transhipment, “Complete-Pooling” or “Partial-Pooling”. Findings: The most important conclusions can be summarized in the following: The sharing of stocks between sites of the same level greatly optimizes the Average Global Profit of the entire system; Collaboration between sites always improves customer Average Global Desservice Rate, ie the probability of no-shortage cycles and the probability of customer satisfaction; In general, the positive effect of collaboration is greater when we apply the "partial pooling" policy with a change in the transshipment threshold. Practical implications: Collaboration could be an effective way to improve the logistics performance of the company without any need for additional cost. Originality value: This article provides a streamlined approach to inventory management in which the supplier makes replenishment decisions based on specific inventory and supply chain policies.

Keywords: Distribution system; logistics; profitability; optimization; transshipment. (search for similar items in EconPapers)
JEL-codes: R41 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:ers:ijfirm:v:13:y:2023:i:1:p:128-151

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