The Effectiveness of Transshipment in an Inventory System with Dependent Demand Among Multiple Retailers

摘要

Research has shown that inventory sharing with transshipments among retailers is an effective means of improving demand fill rate, reducing the expected cost of the entire system, and reducing the expected cost for most individual participants. The objective of this paper is to examine the effects of transshipment in an environment where each retailer experiences either an increase or decrease in demand due to unobservable shortages. More specifically, the unobserved shortages of one retailer will potentially become additional demand for one or more of the other retailers. Our preliminary results suggest that the benefits of transshipment can also be realized in this environment.