Simulation-based lateral transshipment policy optimization for s, S inventory control problem in a single-echelon supply chain network

Abstract

Since it affects the performance of whole supply chain significantly, definition ofcorrect inventory control policy in a supply chain is critical. Recent technologicaldevelopment enabled real time visibility of a supply network by horizontalintegration of each node in a supply network. By this opportunity, inventorysharing among stocking locations is also possible in the effort of cost minimizationin supply chain management. Hence, lateral transshipment gained popularity andstudies seeking the best lateral-transshipment policy is still under research. In thisstudy, we aim to compare different lateral-transshipment policies for an s, Sinventory control problem for a single-echelon supply chain network system. Inthis work, we consider a supply network with three stocking locations which mayperform lateral transshipment among them when backorder takes place. Wedevelop the simulation models of the systems in ARENA 14.5 commercialsoftware and compare the performance of the policies by minimizing the total costunder a pre-defined fill rate constraint by using an optimization tool, OptQuest,integrated in that software. The results show that lateral transshipment works wellcompared to the scenario when there is no lateral transshipment policy in thenetwork.