The use of simple calibrations of individual locations in making transshipment decisions in a multi-location inventory network

T W Archibald, D P Black and K D Glazebrook ()
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T W Archibald: University of Edinburgh Management School
D P Black: Lancaster University Management School, Lancaster University
K D Glazebrook: Lancaster University Management School, Lancaster University

Journal of the Operational Research Society, 2010, vol. 61, issue 2, 294-305

Abstract: Abstract Demands occur at each location in a network of stock-holding retail outlets. Should a location run out of stock between successive replenishments, then subsequent demands may be met either by transshipping from another location in the network or by an emergency supply from a central depot. We deploy an approximate stochastic dynamic programming approach to develop a class of interpretable and implementable heuristics for making transshipment decisions (whether and from where to transship) which make use of simple calibrations of the candidate locations. The calibration for a location depends upon its current stock, the time to its next replenishment and the identity of the location needing stock. A numerical investigation shows strong performance of the proposed policies in comparison with standard industry practice (complete pooling, no pooling) and a recently proposed heuristic. It points to the possibility of substantial cost savings over current practice.

Keywords: dynamic programming; inventory; stochastic process (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (8)

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DOI: 10.1057/jors.2008.127

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