TITLE:
Intra-Firm Inventory Management Model with Transshipments
AUTHORS:
Biri Anthony, Degbe Sewodo Augustin
KEYWORDS:
Inventory Management, Transshipments, Newsvendor Model
JOURNAL NAME:
American Journal of Industrial and Business Management,
Vol.7 No.1,
January
10,
2017
ABSTRACT: This
paper analyzes the implementation of transshipments among two independent
locations which belong to one parent firm and the impact of transshipments,
when implemented between these two locations. We examine how the possibility of
such transshipments affects the optimal inventory orders at each location and find
that, if each location aims to maximize its own profit, their inventory choices
will not in general maximize joint profits. However, we find transshipment
prices which if implemented by the parent firm as incentive design will make
each location behave in order to optimize aggregate profit.