Evaluating emergency lateral transshipment policies using simulation-based approaches

Abstract

This paper deals with a lateral transshipment models involving two-echelon supply chain network, with a single supplier at the higher echelon and two retail locations at the lower. Lateral transshipment is considered as an option at each reorder decision under the periodic review standard (R, s, S) replenishment policy. The purpose of this paper is twofold. Firstly, a metamodel-based simulation optimization approach is applied to find the optimal values of s and S, for each retailer. Secondly, a series of simulation experiments are performed to find the best transshipment policy, in terms of smallest total cost and disservice rate. The tested policies are no pooling, complete pooling and various partial pooling policies according to what the threshold levels of physical stock are selected. An important finding is that each tested transshipment policy is considerably superior to a policy of no such transshipments, although at the expense of increased transportation activity. The best transshipment policy is such partial pooling with exactly s as the well-chosen value of the threshold level. Partial pooling is very interesting transshipment policy and should be further addressed in future research.