Transshipments in a divergent 2-echelon system

  • E. B. Diks
  • A. G. de Kok
Conference paper
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 460)


Consider a two-echelon inventory system consisting of a central depot (CD) supplying a number of retailers. Only the retailers face customer demand. Both the CD and every retailer adopt a periodic review echelon order-up-to policy, i.e., periodically an order is placed to raise the echelon inventory position to the order-up-to-level. At the CD incoming stock is allocated by using the Balanced Stock (BS) rationing policy. When the orders arrive at the retailers, an instantaneous rebalancing of the total echelon stock of the retailers takes place. This rebalancing is realized by lateral transshipments, assuming zero transshipment lead times. The used rebalancing policy is also a BS rationing policy.

The objective of this paper is to determine all the control parameters, such that the target customer service levels are attained at minimal expected total costs. Exact expressions are developed to determine these parameters. The order-up-to-levels are computed by a heuristic, since the exact expressions are intractable. A numerical study reveals that the performance of this heuristic is good. Furthermore, this model is compared with the same model without lateral transshipments, which yields insight into the conditions under which transshipment could be useful.z


Lead Time Fill Rate Allocation Policy Review Period Safety Stock 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag Berlin Heidelberg 1998

Authors and Affiliations

  • E. B. Diks
    • 1
  • A. G. de Kok
    • 1
    • 2
  1. 1.Department of Mathematics and Computing ScienceEindhoven University of TechnologyEindhovenThe Netherlands
  2. 2.Department of Technology ManagementEindhoven University of TechnologyEindhovenThe Netherlands

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