The use of simple calibrations of individual locations in making transshipment decisions in a multi-location inventory network |
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Authors: | T W Archibald D P Black K D Glazebrook |
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Institution: | 1.University of Edinburgh Management School,Edinburgh,UK;2.Lancaster University Management School, Lancaster University,Lancaster,UK;3.Department of Mathematics and Statistics,Lancaster University,Lancaster,UK |
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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. |
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