A two-item two-warehouse periodic review inventory model with transshipment

Koushik Ramakrishna (), Moosa Sharafali () and Yun Lim ()

Annals of Operations Research, 2015, vol. 233, issue 1, 365-381

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 reveal 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. Copyright Springer Science+Business Media New York 2015

Keywords: Multi-item inventory; Transshipment; Pooling; Markov decision models; Lagrangian relaxation (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (8)

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DOI: 10.1007/s10479-013-1483-4

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