Simulation based optimization of multi-location transshipment problem with capacitated transportation

Abstract

In this study, a single-item two-echelon inventory system where the items can be stored in each of N stocking locations is optimized using simulation. The aim of this study is to minimize the total inventory, backorder, and transshipments costs, based on the replenishment and transshipment quantities. In this study, transshipments which are the transfer of products among locations at the same echelon level and transportation capacities which are the transshipment quantities between stocking locations, are also considered. Here, the transportation capacities among the stocking locations are bounded due to transportation media or the locations¿ transshipment policy. Assuming stochastic demand, the system is modeled based on different cases of transshipment capacities and costs. To find out the optimum levels of the transshipment quantities among stocking locations and the replenishment quantities, the simulation model of the problem is developed using ARENA 10.0 and then optimized using the OptQuest tool in this software.