TRADE-OFF BETWEEN TRANSSHIPMENT COSTS AND BENEFITS IN HEADQUARTER-CENTERED COMMON WAREHOUSING MANAGEMENT

摘要

A headquarter-managed centralized distribution center (HQ-CDC) is considered in this study to serve multiple subsidiaries with stochastic demands. The HQ-CDC implement transshipments policy among subsidiaries to deal with their demand fluctuations. This transshipment policy enables the HQ-CDC to reduce the aggregate inventory level (i.e., the safety stocks) and the accordingly cost, without sacrificing the customer service quality. However, there are additional costs associated with transshipments, which are reflected in the mathematical model. A series of numerical studies is conducted to study the trade-off between transshipment cots and benefits. The results show that the transshipment reduces the total inventory level and the corresponding holding cost noticeably, but the corresponding transportation cost should not be neglected. It is worthwhile to pursue the transshipment in situations of high holding cost rate and low transportation charge.