Inventory control policy of preventive lateral transshipment between retailers in multi periods

Qing Ren He, Bin Dan, Ru Liu

Abstract


Purpose: Preventivelateral transshipment can respond to customers who will choose a substitute or to give up when the product is out of stock. Motivatedby the common practice, adecision-making model of preventive lateral transshipment with multi sellingperiods is developed. The purpose of the paper is to explore the optimal preventive lateral transshipment policy with multi selling periods.

Design/methodology/approach: With adiscrete-time dynamic programming model, we take a dynamic programming approach and adopt backward induction to analyze two retailers’ preventive lateral transshipment policy.

Findings: The optimal preventivelateral transshipment policy is a threshold policy which depends on both theremaining selling periods and inventory level. The above properties ensure thattwo retailers can control inventory with preventive lateral transshipment.

Practical implications: The retailer can adjust inventory via the thresholdtype policy. The simple decisionrule which compares on-hand inventory level with the critical inventory level can be used to control inventory by preventive lateral transshipment.

Originality/value: A discrete-timedecision-making model of preventive lateral transshipment policy isformulated. This model takes consideration of multi selling periods, whichis different from most existing researches on preventive lateraltransshipment.


Keywords


preventive lateral transshipment, the transship-up-to level, the transship-down-to level, inventory control policy, multi selling periods

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DOI: http://dx.doi.org/10.3926/jiem.1068


Licencia de Creative Commons 

This work is licensed under a Creative Commons Attribution 4.0 International License

Journal of Industrial Engineering and Management, 2008-2019

Online ISSN: 2013-0953; Print ISSN: 2013-8423; Online DL: B-28744-2008

Publisher: OmniaScience