multi-location transshipment problem with capacitated.pdf

MULTI-LOCATION TRANSSHIPMENT PROBLEM WITH CAPACITATED PRODUCTION Deniz Özdemir Enver Yücesan Yale T. Herer Universidad. Autónoma de INSEAD Technion Nuevo Leon Technology and Operations Faculty of Industrial Postgraduate Program in Management Area Engineering and Sys. Eng. (PISIS/FIME) Boulevard de Constance Management Ciudad Universitaria 77305 Fontainebleau Haifa 32000 San Nicolás de los Garza, France Israel N.L. 66450 Mexico +52 (81) 14 92 03 68 +33 (0)1 60 72 40 17 +972 (4) 829 44 23 deniz@yalma.fime.uanl.mx enver.yucesan@ yale@technion.ac.il September 2007 Abstract We consider coordination among stocking locations through replenishment strategies that explicitly take into account lateral transshipments, i.e., transfer of a product among locations at the same echelon level. Our basic contribution is the incorporation of supply capacity into the traditional transshipment model. Our goal is to analyze the impact on system behavior and on stocking locations’ performance of the fact that the supplier may fail to fulfill all the replenishment orders. We therefore formulate the capacitated supply scenario as a network flow problem embedded in a stochastic optimization problem. To solve this problem, we devise a sample path optimization method together with infinitesimal perturbation analysis (IPA) for computing gradients. We find that, depending on