An improved heuristic for deciding on emergency transshipments

Utilising emergency lateral transshipments between retailers to meet customer demand can be an effective means for companies to improve service levels and/or reduce costs. This paper provides a decision rule for how much (if any) to source and from which retailer(s), taking into account the financial impact of the transshipment decision on future service levels and the timing of subsequent orders from suppliers. While the model explicitly recognises fixed and variable transshipment costs, as well as information on orders en route to retailers, it is simple enough to facilitate real-time execution and/or implementation on a spreadsheet. Simulation results indicate significant improvement on recently published results. We illustrate the method using several examples and discussing sensitivity to key parameters.