Inventory control policy of preventive lateral transshipment between retailers in multi periods
Abstract: Preventivelateral
transshipment can respond to customers who will choose a substitute or to give
up when the product is out of stock. Motivatedby the common practice,
adecision-making model of preventive lateral transshipment with multi
sellingperiods is developed. The purpose of the paper is to explore the optimal
preventive lateral transshipment policy with multi selling periods.
Design/methodology/approach: With adiscrete-time dynamic programming
model, we take a dynamic programming approach and adopt backward induction to
analyze two retailers’ preventive lateral transshipment policy.
Findings: The optimal preventivelateral transshipment policy is a
threshold policy which depends on both theremaining selling periods and
inventory level. The above properties ensure thattwo retailers can control
inventory with preventive lateral transshipment.
Practical implications: The retailer can adjust inventory via the
thresholdtype policy. The simple decisionrule which compares on-hand inventory
level with the critical inventory level can be used to control inventory by
preventive lateral transshipment.
Originality/value: A discrete-timedecision-making model of preventive
lateral transshipment policy isformulated. This model takes consideration of
multi selling periods, whichis different from most existing researches on
preventive lateraltransshipment.
Keywords: preventive lateral
transshipment, the transship-up-to level, the transship-down-to level,
inventory control policy, multi selling periods
Author: Qing Ren He, Bin Dan,
Ru Liu
Journal Code: jptindustrigg140070
