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Thispaper analyzes the implementation of transshipments among two independentlocations which belong to one parent firm and the impact of transshipments,when implemented between these two locations. We examine how the possibility ofsuch transshipments affects the optimal inventory orders at each location and findthat, if each location aims to maximize its own profit, their inventory choiceswill not in general maximize joint profits. However, we find transshipmentprices which if implemented by the parent firm as incentive design will makeeach location behave in order to optimize aggregate profit.


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.

Author: Biri Anthony, Degbe Sewodo Augustin



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