Republic of the Philippines

Southern Luzon State University

College of Engineering
Lucban, Quezon

DITRIBUTION

STRATEGIES
Submitted by:

Mariel andal

Michilla magboo

Jonathan tomas

Submitted to:

Engr.Stella Y. Dahilig

February 27, 2019

DITRIBUTION STRATEGIES
B. TRANSHIPMENTS
The shipment of items between different facilities at the same level in the supply
chain to meet some immediate need.
It is most often considered at the retail level. The transshipment capability allows retailer
to meet customer demand from the inventory of other retailers.
Requirements of this can be met only with advanced information systems
A group of stocking locations that share their inventory in this manner is to form a
pooling group, since they effectively share their stock to reduce the risk of shortages
and provide better service at lower cost.

Two types of lateral transshipments

The lateral transshipment can be divided into two categories: emergency lateral
transshipment (ELT) and preventive lateral transshipment (PLT). ELT directs
emergency redistribution from a retailer with ample stock to a retailer that has reached
stock out. However, PLT reduces risk by redistributing stock between retailers that
anticipate stock out before the realization of customer demands. In short, ELT responds
to stock out while PLT reduces the risk of future stock out.

INVENTORY CONTROL POLICIES IN TRANSHIPMENTS

Transshipment policies are incorporated with traditional inventory control policies which
are classified based on two fundamental questions: when to replenish and how much to
order. Commonly used inventory control policies such as (S-1,S), (Q,R), (R,S), and
(s,S) will be discussed as follows.
 The Inventory control policy (S-1,S) is continuous one-for-one stock
replenishments (S-1,S) is a commonly used inventory control policy for a system in
cooperation with transshipment. It means whenever any stock is withdrawn, a
replenishment order is released. Inventory control policy (Q,R) is continuous (Q,R)
policy consider a reorder quantity, reorder point (Q,R) system instead, where an order
of fixed size (Q) is placed whenever the reorder point (R) is reached. The (Q,R) system
is a very common and relatively straightforward system whose primary drawback is
associated with demands of appreciable magnitude (Silver & Peterson, 1985).
Other studies of transshipment assume periodic review policies and they usually
assume no order setup cost, so that an order-up-to or base-stock policy is appropriate.
In a (s, S) inventory policy, an order is placed every time the inventory position drops
to or below s, and the order size is the difference between S, the order up to level, and
the inventory position at the time of placing the order.
CLASSIFICATION OF TRANSSSHIPMENT PROBLEM
The first one is the Number of item(s) , most of the transshipment related research
deals with single-item problems in which only one item at a time is considered. Such
problems are typical when we use an item approach. Under an item approach, inventory
levels for each individual item are set independently.
The second one is the Number of levels and locations in the system where most
of the previous study is focused on dealing with the transshipment problem in a two
echelon supply chain network, where it includes a single source supplier/warehouse at
the higher level and multiple (two or more than two) retailers at the lower level. The
assumptions for simple problem structure are necessary for the reason of computational
tractability in the process of finding the optimal solution.
The third are the Space, capacity, and time constraints are three factors that can
affect significantly the system performance, either costs or service level. Not many
works have been done in the areas of transshipment problem accounting for these
factors.
The last problem is the Transshipment direction where it is associated to the
concepts of shortage cost differentiation and the usage of substitution item. Most
previous papers focus on transshipments that are not limited to one direction.
Simply put, Transhipment = the act of off-loading a container from one ship and loading
it onto another ship..
For Example
Why does cargo need to be transhipped..??
There is no shipping line that can cover all ports around the world on a single service
and therefore the services are segregated into trade lanes.
Let’s say that there is a shipment from Durban in South Africa to Manila in Philippines..
Since this vessel A does not call Manila as part of its rotation/service, the container(s)
will need to be taken off at one of the ports that vessel A calls.

Let’s assume that this port is Singapore. These container(s) will be off-loaded at
Singapore and then loaded onto another vessel that operates on a route that connects
Singapore to Manila.. Let’s call this vessel B..
So the container that left Durban on vessel A will reach Manila on vessel B via
transshipment at Singapore.. The bill of lading that the customer has been issued will
show Vessel A, but the arrival notification that the consignee in Manila receives will
show Vessel B as that is the final discharge vessel..
Most of the big lines like MSC, Maersk etc. have services covering virtually all corners
of the globe via transshipment connections from one port or the other..

These lines also have what is known as Transshipment Hubs which are the ports on
their service routes that have transshipment connection options to other parts of the
world..

Example : MSC’s transshipment hub for their service to Australia is Port Louis, Maersk’s
transshipment hub for their service to Middle East is Salalah..

This transhipment concept truly connects the world and one is able to ship a
container from anywhere to anywhere in the world..

The transshipment strategy is recommended for companies like IKEA where the
goods are easy to assemble or disassemble by the customers themselves. It
requires an export license to carry transshipped goods unless it comes under certain
exemptions. It usually takes place between two different countries

C. SELECTING APPROPRIATE STRATEGIES

Very few major supply chains utilize one of these strategies exclusively. Typically,
different approaches are used for different products, making it necessary to analyze the
supply chain and determine the appropriate approach to use for a particular product or
product family.
 To evaluate these concepts, we proceed with a simple question: What are the
factors that influence distribution strategies? Obviously, customer demand and location,
service level, and costs, including transportation and inventory costs, all play a role.

It is important to note the interplay of inventory and transportation costs. Both

transportation and inventory costs depend on the shipment size, but in opposite
ways.
Demand variability also has an impact on the distribution strategy.
Reference
Alfredsson, P. & Verrijdt, J. (1999). Modeling emergency supply flexibility in a
two-echelon inventory system. Management Science, Vol.45, 1416–1431. ISSN:
0025-1909 Archibald, T.W.;
Sassen, S.A. & Thomas, L.C. (1997). An optimal policy for a two depot inventory
problem with stock transfer. Management Science, Vol.43, 173–183. ISSN:
0025-1909