Multi-Item Distribution Policies with Supply Hub and Lateral Transshipment

Abstract

Supply Hub is defined as the horizontal coordination among the suppliers while lateral transshipment is a horizontal coordination policy among the retailers. By considering the Supply Hub and lateral transshipment simultaneously, ones can reduce the total cost of the supply chain system and improve the response to customer requirement and the customers’ satisfaction. We investigate the distribution policies for the supply chain which consists of multisuppliers, single Supply Hub, and multidistributors. In the system, both Supply Hub and distributors adopt the (t,S) policy, Supply Hub will not be out of stock, and backlogging is forbidden. Customer requirements at distributors are assumed to be independent random variables complying with uniform distribution; transshipment is assumed to be bidirectional, instantaneous, and emergent. We establish the distribution models, respectively, for the cases of transshipment or no transshipment. For the case with transshipment, we design a GA-based solution method involving a two-stage selection technology, that is, firstly, selecting individuals from parent population to generate offspring chromosomes and, secondly, selecting individuals from the interim population comprising all of the parent and offspring genomes, to form the next-generation population. We show that lateral transshipment can increase the overall profit of the supply chain by the comparison examinations between the models with and without transshipment.