Inventory sharing under decentralized preventive transshipments |
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| Authors: | Ying Rong Lawrence V Snyder Yang Sun |
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| Institution: | 1. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, 200052 China;2. Industrial and Systems Engineering Department, Lehigh University, Bethlehem, Pennsylvania 18015;3. College of Business Administration, California State University, Sacramento, California 95819 |
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| Abstract: | We consider preventive transshipments between two stores in a decentralized system with two demand subperiods. Replenishment orders are made before the first subperiod, and the stores may make transshipments to one another between the subperiods. We prove that the transshipment decision has a dominant strategy, called a control‐band conserving transfer policy, under which each store chooses a quantity to transship in or out that will keep its second‐subperiod starting inventory level within a range called a control band. We prove that the optimal replenishment policy is a threshold policy in which the threshold depends on the capacity level at the other store. Finally, we prove that there does not exist a transfer price that coordinates the decentralized supply chain. Our research also explains many of the differences between preventive and emergency transshipments, including differences in the optimal transfer policies and the existence or nonexistence of transfer prices that coordinate the system. © 2010 Wiley Periodicals, Inc. Naval Research Logistics, 2010 |
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| Keywords: | inventory sharing preventive transshipment dominant strategy |
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