Optimal and heuristic algorithms for the multi-location dynamic transshipment problem with fixed transshipment costs

Yale T. Herer*, Michal Tzur

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We consider centrally controlled multi-location systems, which coordinate their replenishment strategies through the use of transshipments. In a dynamic deterministic demand environment the problem is characterized by several locations, each of which has known demand for a single product for each period in a given finite horizon. We consider replenishment, transshipment and inventory holding costs at each location, where the first two have location-dependent fixed, as well as linear components, and the third is linear and identical to all locations. We prove that the resulting dynamic transshipment problem is NP-hard, identify a special structure which is satisfied by an optimal solution and develop, based on this structure, an exponential time algorithm to solve the problem optimally. In addition, we develop a heuristic algorithm, based on partitioning the time horizon, which is capable of solving larger instances than the optimal solution. Our computational tests demonstrate that the heuristic performs extremely well.

Original languageEnglish
Pages (from-to)419-432
Number of pages14
JournalIIE Transactions (Institute of Industrial Engineers)
Volume35
Issue number5
DOIs
StatePublished - May 2003

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