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 AJIBM  Vol.7 No.1 , January 2017
Intra-Firm Inventory Management Model with Transshipments
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.
Keywords: Inventory Management, Transshipments, Newsvendor Model
Cite this paper: Anthony, B. and Augustin, D. (2017) Intra-Firm Inventory Management Model with Transshipments. American Journal of Industrial and Business Management, 7, 15-26. doi: 10.4236/ajibm.2017.71002.
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