A Manager's Roadmap Guide for Lateral Trans-Shipment in Supply Chain Inventory Management

As competition increases, manufacturers and wholesalers respond by becoming more cost conscious and more responsive to changing market needs. One supply chain strategy conserves a low inventory level, sufficient simply to fulfil immediate orders. However, a low inventory level is accompanied by a higher risk of stock outages potentially creating the situation where a minimum customer service level is breached leading to sales losses and customer dissatisfaction. To manage these potentials, manufacturers and wholesalers can increase the flexibility in their inventory systems by adopting a mix of strategies including emergency lateral trans-shipment (LT) from other warehouses at a higher costand simultaneously backordering from their usual suppliers to match the stochastic demand. Decision Rules that support the required decision making process have practical value for inventory management practitioners.