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Lateral Transshipments afford a valuable mechanism for compensating unmet demands only with on-hand inventory. In this paper we investigate the case where locations have a limited storage capacity. The problem is to determine how much to replenish each period to minimize the expected global cost while satisfying storage capacity constraints. We propose a Real-Coded Genetic Algorithm (RCGA) with a new crossover operator to approximate the optimal solution. We analyze the impact of different structures of storage capacities on the system behaviour. We find that Transshipments are able to correct the discrepancies between the constrained and the unconstrained locations while ensuring low costs and system-wide inventories. Our genetic algorithm proves its ability to solve instances of the problem with high accuracy.
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