Application of Lateral Transshipment in Cost Reduction of Decentralized Systems Academic Article uri icon


  • COVID-19 has exposed the global supply chains to great vulnerability. In such extreme circumstances, product availability becomes a primary concern. This paper studies a basic inventory management strategylateral transshipmentunder decentralized systems, which may play an important role in dealing with stockouts during unexpected crises. Lateral transshipments not only react quickly to stockout, but are also environmentally friendly due to the significant reduction of production and transportation pollution. This paper studies optimal lateral transshipment and replenishment decisions under a decentralized setting. We construct a multi-stage stochastic model that captures demand uncertainty and customer switching behavior. We demonstrate that, similar to the centralized setting, the optimal transshipment decision follows a double-threshold structure. The optimal replenishment quantities are determined under two pricing mechanismsindividual mechanism (IP) and negotiated mechanism (NP). Numerical examples are provided to demonstrate the impact of lateral transshipment on supply chain cost reduction.

published proceedings


altmetric score

  • 1.75

author list (cited authors)

  • Liao, Y. i., Li, J., Hu, X., Li, Y., & Shen, W.

citation count

  • 9

complete list of authors

  • Liao, Yi||Li, Jun||Hu, Xinxin||Li, Ying||Shen, Wenjing

publication date

  • June 2020