An effective lateral transshipment policy to improve service level in the supply chain

A new lateral transshipment policy, called service level adjustment (SLA), is proposed. SLA differs from previous policies by integrating emergency lateral transshipment with preventive lateral transshipment to efficiently respond to customer demands. Additionally, the proposed policy considers the service level to decide the quantity for lateral transshipment. Experiments simulating a two-echelon supply chain were conducted. The proposed policy has lower total costs than previous transshipment policies. Moreover, our policy more effectively responds to changes in demands, penalty cost. and ordering cost. (c) 2006 Published by Elsevier B.V.