Service Parts Inventory Control with Lateral Transshipment that takes Time

In equipment-intensive industries such as truck manufacturing, petrochemical refineries, and dredging, service parts are often slow moving items whose transshipment time is not negligible. However, this aspect is hardly considered in the existing spare parts literature. We access the effect of non-negligible lateral transshipment time on various aspects of spare parts inventory control. More importantly, we introduce true customer-oriented service levels by taking pipeline stocks into account. A case study shows that lateral transshipment may lead to lower system performance, which supports the results from some recent studies. Furthermore, we find that considerable savings can be obtained when we include the uncommitted pipeline stocks in both base stock allocation and lateral transshipment decisions.