Emergency transshipment under supply disruption

Abstract

It’s a common method for companies to mitigate the impact of supply disruptions by sharing the redundant capacity from other firms through transshipment. In this paper, from the perspective of the retailer, we study that when the supplier's supply fails to meet the retailer's order demand due to an emergency, the disrupted retailer requests transshipment at the transshipment price set by the others to satisfy customers demand during the disruption. In each period during the disruption, we propose the optimal dynamic transshipment decision policies for two scenarios of customer demand. Based on the Newsvendor problem, we find that the relationship among transshipment price, stock-out cost and salvage value impact retailer's decision on the transshipment quantity.