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      In-Season transshipments among competitive retailers

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      Author(s)
      Çomez, N.
      Stecke, K. E.
      Çakanyıldırım, M.
      Date
      2012-02-28
      Source Title
      Manufacturing and Service Operations Management
      Print ISSN
      1523-4614
      Electronic ISSN
      1526-5498
      Publisher
      INFORMS
      Volume
      14
      Issue
      2
      Pages
      290 - 300
      Language
      English
      Type
      Article
      Item Usage Stats
      139
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      179
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      Abstract
      A decentralized system of competing retailers that order and sell the same product in a sales season is studied. When a customer demand occurs at a stocked-out retailer, that retailer requests a unit to be transshipped from another retailer who charges a transshipment price. If this request is rejected, the unsatisfied customer may go to another retailer with a customer overflow probability. Each retailer decides on the initial order quantity from a manufacturer and on the acceptance/rejection of each transshipment request. For two retailers, we show that retailers' optimal transshipment policies are dynamic and characterized by chronologically nonincreasing inventory holdback levels. We analytically study the sensitivity of holdback levels to explain interesting findings, such as smaller retailers and geographically distant retailers benefit more from transshipments. Numerical experiments show that retailers substantially benefit from using optimal transshipment policies compared to no sharing. The expected sales increase in all but a handful of over 3,000 problem instances. Building on the two-retailer optimal policies, we suggest an effective heuristic transshipment policy for a multiretailer system.
      Keywords
      Dynamic transshipment policy
      Demand overflow
      Decentralized distribution system
      Permalink
      http://hdl.handle.net/11693/13075
      Published Version (Please cite this version)
      http://dx.doi.org/10.1287/msom.1110.0364
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      • Department of Management 579
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