4.6 Article

Stochastic optimization for transshipment problems with positive replenishment lead times

Journal

INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS
Volume 135, Issue 1, Pages 61-72

Publisher

ELSEVIER SCIENCE BV
DOI: 10.1016/j.ijpe.2010.09.020

Keywords

Supply chain management; Stochastic optimization; Transshipment; Simulation

Funding

  1. NSFC [70901028]

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Transshipments, monitored movements of material at the same echelon of a supply chain, represent an effective pooling mechanism. Earlier papers dealing with transshipments either do not incorporate replenishment lead times into their analysis, or only provide a heuristic algorithm where optimality cannot be guaranteed beyond settings with two locations. This paper uses infinitesimal perturbation analysis by combining with a stochastic approximation method to examine the multi-location transshipment problem with positive replenishment lead times. It demonstrates the computation of optimal base stock quantities through sample path optimization. From a methodological perspective, this paper deploys a duality-based gradient computation method to improve computational efficiency. From an application perspective, it solves transshipment problems with non-negligible replenishment lead times. A numerical study illustrates the performance of the proposed approach. (C) 2010 Elsevier B.V. All rights reserved.

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