Analysis of the effect of emergency lateral transshipment on a multi-echelon inventory model in SCM environment

Abstract

This thesis deals with a continuous-review two-echelon inventory model with one-for-one replenishment and Poisson demand considered. Two types of inventory systems are considered. The first type is the inventory system where transshipments among retailers are allowed. The second type is the inventory system where transshipments are not allowed. The inventory systems are also divided into two classes by the number of distribution centers (DCs) which provide each retailer with inventory items. The first class is the inventory system where every retailer receives items from only one DC. It is called "1: N class inventory system" in this thesis. The second class is the inventory system where each retailer can receive items from one or more DCs. It is called "M.N class inventory system". This class dividing leads to four kinds of inventory models, to be considered in this thesis. The proposed two-phase model is constructed to find out the optimal inventory positions which minimize supply chain costs. The supply chain costs consist of inventory holding costs and backorder costs. Transshipment costs should also be considered, especially in the case when transshipments are allowed. Approximations for customer service levels of the system are evaluated in the first phase, which is represented by the queueing model. Then, the optimal inventory positions are found subject to the constraints for service level in the second phase, which is represented by the minimum total cost model. Simulation tests are performed to assure the effectiveness of the proposed queueing model. As the result of simulation test, the queueing model was confirmed as being effective. The minimum total cost model was also applied to various numerical examples. The result shows that the effect of transshipment depends on two factors: transportation time from DC to retailer groups and backorder costs. As transportation time gets longer, and as backorder costs get higher, the effect of transshipment on ...