Planning proactive inventory transshipments in retail networks

Proactive transshipments aim to reduce the risk of future shortages in a retail network. Compared to reactive transshipments which are used to address shortages that have arisen in the network, proactive transshipments may have lower implementation costs due to the time of the transshipment being fixed in advance. This paper proposes a model that can be used to plan proactive transshipments in a general setting. Approximate dynamic programming is applied to develop a heuristic for the model. A numerical study compares the proposed heuristic with alternative policies and investigates the characteristics of the network that favour proactive transshipment.