Multi-location System with Lateral Transshipments

  • Geert-Jan van Houtum
  • Bram Kranenburg
Part of the International Series in Operations Research & Management Science book series (ISOR, volume 227)


In this chapter, we consider a multi-item, multi-location, single-echelon system with the use of lateral and emergency shipments, basestock control and aggregate mean waiting time constraints. The local warehouses are divided into two types: Main and regular local warehouses. Lateral transshipments are allowed from main local warehouses only. A practical advantage of this structure is that only a limited number of local warehouses has to be equipped for providing (fast) lateral transshipments. This structure represents a form of partial pooling, with no pooling (zero main locals) and full pooling (zero regular locals) as special cases. We develop an accurate and fast approximate evaluation method, and exploit this method in a heuristic procedure for the basestock level determination. We show that only a small number of main locals is sufficient to obtain most of the full pooling benefits. We also apply our methods to case data of ASML.


  1. 1.
    Alfredsson, P., Verrijdt, J.: Modeling emergency supply flexibility in a two-echelon inventory system. Manag. Sci. 45, 1416–1431 (1999) Google Scholar
  2. 2.
    Alvarez, E.M., Van der Heijden, M.C., Vliegen, I.M.H., Zijm, W.H.M.: Service differentiation through selective lateral transshipments. Eur. J. Oper. Res. 237, 824–835 (2014) Google Scholar
  3. 3.
    Archibald, T.W., Sassen, S.A., Thomas, L.C.: An optimal policy for a two depot inventory problem with stock transfer. Manag. Sci. 43, 173–183 (1997) Google Scholar
  4. 4.
    Axsäter, S.: Modeling emergency lateral transshipments in inventory systems. Manag. Sci. 36, 1329–1338 (1990) Google Scholar
  5. 5.
    Axsäter, S.: Evaluation of unidirectional lateral transshipments and substitutions in inventory systems. Eur. J. Oper. Res. 149, 438–447 (2003)CrossRefGoogle Scholar
  6. 6.
    Axsäter, S.: A new decision rule for lateral transshipments in inventory systems. Manag. Sci. 49, 1168–1179 (2003)CrossRefGoogle Scholar
  7. 7.
    Axsäter, S., Howard, C., Marklund, J.: A distribution inventory model with transshipments from a support warehouse. IIE Trans. 45, 309–322 (2013) Google Scholar
  8. 8.
    Deflem, Y., Van Nieuwenhuyse, I.: Managing inventories with one-way substitution: a Newsvendor analysis. Eur. J. Oper. Res. 228, 484–493 (2013) Google Scholar
  9. 9.
    European Supply Chain Forum (Stein, W.): Spare parts planning at ASML. ESCF Operations Practices. (2012)
  10. 10.
    Evers, P.T.: Heuristics for assessing emergency transshipments. Eur. J. Oper. Res. 129, 311–316 (2001) Google Scholar
  11. 11.
    Howard, C., Marklund, J., Tan, T., Reijnen, I.C.: Inventory control in a spare parts distribution system with emergency stocks and pipeline information. Manuf. Serv. Oper. Manag. (2015, to appear)
  12. 12.
    Kranenburg, A.A., Van Houtum, G.J.: A new partial pooling structure for spare parts networks. Eur. J. Oper. Res. 199, 908–921 (2009)1 Google Scholar
  13. 13.
    Kukreja, A., Schmidt, C.P., Miller, D.M.: Stocking decisions for low-usage items in a multilocation inventory system. Manag. Sci. 47, 1371–1383 (2001) Google Scholar
  14. 14.
    Kutanoglu, E.: Insights into inventory sharing in service parts logistics systems with time-based service levels. Comput. Ind. Eng. 54, 341–358 (2008) Google Scholar
  15. 15.
    Lee, H.L.: A multi-echelon inventory model for repairable items with emergency lateral transshipments. Manag. Sci. 33, 1302–1316 (1987) Google Scholar
  16. 16.
    Minner, S., Silver, E.A., Robb, D.J.: An improved heuristic for deciding on emergency transshipments. Eur. J. Oper. Res. 148, 384–400 (2003) Google Scholar
  17. 17.
    Olsson, F.: An inventory model with unidirectional lateral transshipments. Eur. J. Oper. Res. 200, 725–732 (2010) Google Scholar
  18. 18.
    Paterson, C., Kiesmüller, G., Teunter, R., Glazebrook, K.: Inventory models with lateral transshipments: a review. Eur. J. Oper. Res. 210, 125–136 (2011) Google Scholar
  19. 19.
    Reijnen, I.C., Tan, T., Van Houtum, G.J.: Inventory planning for spare parts networks with delivery time requirements. Working paper 280, Beta Research School, Eindhoven University of Technology (2009) Google Scholar
  20. 20.
    Rijk, P.J.: Multi-item, multi-location stock control with capacity constraints for the fieldstock of service parts at Océ. MSc thesis, master program Industrial Engineering, Eindhoven University of Technology. (2007)
  21. 21.
    Ross, S.M.: Stochastic Processes. Wiley, New York (1996) Google Scholar
  22. 22.
    Seidscher, A., Minner, S.: A semi-Markov decision problem for proactive and reactive transshipments between multiple warehouses. Eur. J. Oper. Res. 230, 42–52 (2013) Google Scholar
  23. 23.
    Tagaras, G., Cohen, M.A.: Pooling in two-location inventory systems with non-negligible replenishment lead times. Manag. Sci. 38, 1067–1083 (1992) Google Scholar
  24. 24.
    Tiemessen, H.G.H., Fleischmann, M., Van Houtum, G.J., Van Nunen, J.A.E.E., Pratsini, E.: Dynamic demand fulfillment in spare parts networks with multiple customer classes. Eur. J. Oper. Res. 228, 367–380 (2013) Google Scholar
  25. 25.
    Tijms, H.C.: A First Course in Stochastic Models. Wiley, Chichester (2003) Google Scholar
  26. 26.
    Van Wijk, A.C.C.: Pooling and polling: creation of pooling in inventory and queueing models. Ph.D. thesis, Eindhoven University of Technology. (2012)
  27. 27.
    Van Wijk, A.C.C., Adan, I.J.B.F., Van Houtum, G.J.: Approximate evaluation of multi-location inventory models with lateral transshipments and hold back levels. Eur. J. Oper. Res. 218, 624–635 (2012) Google Scholar
  28. 28.
    Van Wijk, A.C.C., Adan, I.J.B.F., Van Houtum, G.J.: Optimal allocation policy for a multi-location inventory system with a quick response warehouse. OR Lett. 41, 305–310 (2013)Google Scholar
  29. 29.
    Varga, R.: Matrix Iterative Analysis. Prentice-Hall, Englewood Cliffs (1962) Google Scholar
  30. 30.
    Wong, H., Van Houtum, G.J., Cattrysse, D., Van Oudheusden, D.: Simple, efficient heuristics for multi-item multi-location spare parts systems with lateral transshipments and waiting time constraints. J. Oper. Res. Soc. 56, 1419–1430 (2005) Google Scholar
  31. 31.
    Wong, H., Van Houtum, G.J., Cattrysse, D., Van Oudheusden, D.: Multi-item spare parts systems with lateral transshipment and waiting time constraints. Eur. J. Oper. Res. 171, 1071–1093 (2006)CrossRefGoogle Scholar
  32. 32.
    Xu, K., Evers, P.T., Fu, M.C.: Estimating customer service in a two-location continuous review inventory model with emergency transshipments. Eur. J. Oper. Res. 145, 569–584 (2003) Google Scholar
  33. 33.
    Zhao, H., Deshpande, V., Ryan, J.K.: Inventory sharing and rationing in decentralized dealer networks. Manag. Sci. 51, 531–547 (2005) Google Scholar
  34. 34.
    Zhao, H., Ryan, J.K., Deshpande, V.: Optimal dynamic production and inventory transshipment policies for a two-echelon make-to-stock system. Oper. Res. 56, 400–410 (2008)CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2015

Authors and Affiliations

  • Geert-Jan van Houtum
    • 1
  • Bram Kranenburg
    • 2
  1. 1.Eindhoven University of TechnologyEindhovenThe Netherlands
  2. 2.Consultants in Quantitative Methods CQM B.V.EindhovenThe Netherlands

Personalised recommendations