Freight simulation: a monte carlo simulation approach to the capacitated multi-location transshipment problem

Authors:
Deniz Özdemir;Enver Yücesan;Yale T. Herer
Affiliations:
Technology Management Area, INSEAD, Boulevard de Constance, Fontainebleau Cedex, France;Technology Management Area, INSEAD, Boulevard de Constance, Fontainebleau Cedex, France;Israel Institute of Technology, Haifa, Israel
Venue:
Proceedings of the 35th conference on Winter simulation: driving innovation
Year:
2003

Citing 8
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Abstract

We consider a supply chain, which consists of N retailers and one supplier. The retailers may be coordinated through replenishment strategies and lateral transshipments, that is, movement of a product among the locations at the same echelon level. Transshipment quantities may be limited, however, due to the physical constraints of the transportation media or due to the reluctance of retailers to completely pool their stock with other retailers. We introduce a stochastic approximation algorithm to compute the order-up-to quantities using a sample-path-based optimization procedure. Given an order-up-to S policy, we determine an optimal transshipment policy, using an LP/Network flow framework. Such a numerical approach allows us to study systems with arbitrary complexity.