Inventory Control in Supply Chain Through Lateral Transshipment – A Case Study in Indian Industry

Supply chain management emphasizes collaborative relationships between supply chain members. The purpose of this work is to examine the antecedents of retailer - retailer partnership and to explore its impact on the supply chain performance. We consider coordination among stocking locations through replenishment strategies that take explicitly into consideration transshipments, transfer of a product among locations at the same echelon level. A continuous review inventory system has been adopted, in which lateral transshipments are allowed. In general, if a demand occurs at a location and there is no stock on hand, the demand is assumed to be backordered or lost. Lateral transshipments serve as an emergency supply in case of stock out and the rule for lateral transshipments is to always transship when there is a shortage at one location and stock on hand at the other. The aim is to explore the role of lateral transshipment to control inventory and associated cost within supply chain and, from this, to develop an exploratory framework that assists understanding in the area. A simple and intuitive model is presented that enables us to characterize optimal inventory and transshipment policies for ‘n’ locations. The research is based on a case study of a bi-wheeler company in India by using its data and to strengthen its supply chain. This paper represents such an effort in that it integrates both inventory and transshipment components in the study of multi-location inventory systems. This work will enable the managers to overcome the uncertainties of demand and lead-time resulting into customer satisfaction and cost reduction.