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An Effective Lateral Transshipment Policy to Improve the Service Level in the Supply Chain  

Jeon Young Sang (한양대학교 산업공학과)
Lee Young Hae (한양대학교 산업공학과)
Jung Jung Woo (한양대학교 산업공학과)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.30, no.1, 2005 , pp. 17-26 More about this Journal
Abstract
There is the uncertainty of demands at each retailer in the supply chain. To satisfy customers' demand, retailer must have enough inventory. Nevertheless, stockout is occurred for some retailers. A lateral transshipment policy can be effectively used to deal with stockout. The new lateral transshipment policy, referred to service level adjustment (SLA), is suggested. The difference between SLA and previous policies is the integration of an emergency lateral 'transshipment with a preventive lateral transshipment to efficiently respond customers' demand in the proposed policy. Additionally, the service level to decide the quantity of products is considered. Simulation experiment is executed to treat stochastic factors in the two-echelon supply chain. The proposed policy can reduce total cost and is more effective to the change of demand, penalty cost, and ordering cost than the currently used policies.
Keywords
Supply Chain; Lateral Transshipment; Service Level;
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