A Multi-Echelon Inventory Model for Repairable Items with Emergency Lateral Transshipments

In multi-echelon inventory systems that cover extensive geographical regions, emergency lateral transshipment between bases is commonly practiced to provide improved service support for products. In these systems, since neighboring bases are at shorter distances than to the depot, the base may seek stock from them to satisfy its demands when it is out of stock. In this paper we develop a continuous-review multi-echelon model for repairable items when emergency lateral transshipments between identical bases are allowed. Approximations are derived and tested for the expected level of backorders and the quantity of emergency lateral transshipments in cases where fairly high service levels are required. These approximations are used to determine the optimal stocking levels in such a system. A procedure to find these stocking levels is given. Numerical examples illustrate the application of the procedure and the tradeoffs involved in emergency lateral transshipment.