Cost-parametric analysis of lateral transshipment policies in two-echelon supply chains

Abstract In this paper, we examine the cost effects of two lateral (intra-echelon) transshipment approaches in a two-echelon supply chain network, with a single supply source at the higher echelon and multiple retail locations at the lower, through a series of simulation experiments under different operating conditions. An important finding is that either of the proposed lateral shipment approaches is considerably superior to a policy of no such shipments, albeit at the expense of increased transportation activity. Further, an ad hoc emergency transshipment approach appears to be significantly more effective in terms of several important criteria, as compared to a more systematic transshipment technique based on stock level equalization.