Service differentiation through selective lateral transshipments

E.M. Alvarez, M.C.Z. van der Heijden, I.M.H. Vliegen, W.H.M. Zijm

Research output: Contribution to journalArticleAcademicpeer-review

10 Citations (Scopus)

Abstract

We consider a multi-item spare parts problem with multiple warehouses and two customer classes, where lateral transshipments are used as a differentiation tool. Specifically, premium requests that cannot be met from stock at their preferred warehouse may be satisfied from stock at other warehouses (so-called lateral transshipments). We first derive approximations for the mean waiting time per class in a single-item model with selective lateral transshipments. Next, we embed our method in a multi-item model minimizing the holding costs and costs of lateral and emergency shipments from upstream locations in the network. Compared to the option of using only selective emergency shipments for differentiation, the addition of selective lateral transshipments can lead to significant further cost savings (14% on average). ?? 2014 Elsevier B.V. All rights reserved.
Original languageEnglish
Pages (from-to)824-835
Number of pages12
JournalEuropean Journal of Operational Research
Volume237
Issue number3
DOIs
Publication statusPublished - 16 Sep 2014

Keywords

  • Inventory
  • Lateral transshipments
  • Service differentiation
  • Spare parts

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