Fixed Charge Unbalanced Transportation Problem in Inventory Pooling with Multiple Retailers

Ramidayu Yousuk and Huynh Trung Luong
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Ramidayu Yousuk: Kasetsart University, Thailand
Huynh Trung Luong: Asian Institute of Technology, Thailand

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Abstract: The paper presents the formulation of a mathematical model of a multi-retailer inventory system with preventive lateral transshipment. The fixed charge unbalanced transportation problem is employed to find the optimal transshipment policy. Each retailer employs base stock periodic review policy. The model assumes Poisson distributed demand and instantaneous transshipment. Unsatisfied demands are fully backlogged. Transshipment quantity is controlled by the hold-back inventory level. Numerical experiments are conducted to illustrate the applicability of the proposed mathematical model. A comparative study between small and large pooling groups is also investigated. The results exhibit that the benefits of preventive lateral transshipment are more significant when the number of retailers increases. Moreover, by employing fixed charged transportation problem, the proposed model is proved to be effective in solving the problem with fixed transshipment cost for both identical and nonidentical retailers.

Keywords: inventory; inventory pooling; transshipment; preventive lateral transshipment; multiple retailers; fixed charge transportation problem (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:tkp:mklp15:227-236

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