Abstract: Many supply chain risks result from supply risk. Once supply disruption occurs, a retailer with stock out usually transships product from other retailers with surplus product to meet the demand. Therefore, retailer transshipment policy with supply disruption in a supply chain is studied in this paper. Considering a two-stage supply chain consisting of two suppliers and two retailers with supply disruption, jointly considering four cases of supply disruption, retailers' order quantity decision models with product two-direction transshipment, one-direction transshipment and non-transshipment are developed. Order quantity and profit under three different transshipment policies are compared, and impact of transshipment price and transshipment cost on retailers' order quantity and profit are analyzed. A numerical example is given to demonstrate the effectiveness of proposed model, and analyze the impact of supply disruption probability and other parameters on retailers' optimal order quantity and profits. It is shown that the profits of retailers with two-direction transshipment are greater than those with one-direction transshipment, and the profits of retailers with one-direction transshipment are greater than those with non-transshipment. For the retailer who transship out the product under one-direction transshipment policy, the order quantity with one-direction transshipment is greater than that with non-transshipment, and the order quantity with non-transshipment is greater than that with two-direction transshipment. For the retailer who transship in the product under one-direction transshipment policy, the order quantity with non-transshipment is greater than that with two-direction transshipment, and the order quantity with two-direction transshipment is greater than that with one-direction transshipment. The contribution of this paper lies in three aspects. Firstly, previous research doesn't jointly consider the supply disruption and product transshipment, while four different cases of supply disruption and three different transshipment policies of retailers are considered in this paper. Secondly, previous research mostly studies the transshipment policy of retailers with one supplier, whereas the transshipment policies of retailers with two suppliers are investigated in this paper. Thirdly, previous research mostly only considers one-direction transshipment or two-direction transshipment; however, not only one-direction transshipment but also two-direction transshipment are studied in this paper, and performs comparison analysis between them are carried out.

Key words: supply disruption, transshipment policy, supply chain