Article ID: | iaor201110541 |
Volume: | 135 |
Issue: | 1 |
Start Page Number: | 61 |
End Page Number: | 72 |
Publication Date: | Jan 2012 |
Journal: | International Journal of Production Economics |
Authors: | Ycesan Enver, (Yale) Gong Yeming |
Keywords: | stochastic processes, combinatorial optimization, heuristics |
Transshipments, monitored movements of material at the same echelon of a supply chain, represent an effective pooling mechanism. Earlier papers dealing with transshipments either do not incorporate replenishment lead times into their analysis, or only provide a heuristic algorithm where optimality cannot be guaranteed beyond settings with two locations. This paper uses infinitesimal perturbation analysis by combining with a stochastic approximation method to examine the multi‐location transshipment problem with positive replenishment lead times. It demonstrates the computation of optimal base stock quantities through sample path optimization. From a methodological perspective, this paper deploys a duality‐based gradient computation method to improve computational efficiency. From an application perspective, it solves transshipment problems with non‐negligible replenishment lead times. A numerical study illustrates the performance of the proposed approach.