A semi-Markov model with holdout transshipment policy and phase-type exponential lead time

In this paper, a semi-Markov decision model of a two-location inventory system with holdout transshipment policy is reviewed under the assumption of phase-type exponential replenishment lead time rather than exponential lead time. The phase-type exponential lead time more closely approximates fixed lead time as the number of phases increases. Unlike past research in this area which has concentrated on the simple transshipment policies of complete pooling or no pooling, the research presented in this paper endeavors to develop an understanding of a more general class of transshipment policy. In addition, we propose an effective method to approximate the dynamic holdout transshipment policy.