A case-based roadmap for lateral transshipment in supply chain inventory management

Abstract

Manufacturers and wholesalers are increasingly cost conscious in response to today’s hyper-competitive environment. Lateral transshipment (LT) has been proposed as a viable solution to drive total inventory costs down whilst increasing customer service level. Our study proposes five LT decision rules with a case-based roadmap to guide professional inventory management. Results of this large fast moving consumer goods case study company demonstrate superior inventory management performance with implementing a combined reactive and proactive LT strategy to determine whether to transship emergency stock from other warehouse or to backorder from suppliers, size of transshipment, favorite wholesaler, preferred supplier, and extra quantity for preventive LT, which are the key LT decision points among the professional supply chain management practitioners.