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Abstract
Risk pooling is an effective means to improving customer service and reducing total system costs, especially when the distribution center acts as a coordinator as well as permitting lateral transshipment in the system. In this study, we first divide the studies which are related to the distribution system as well as the lateral transshipment into 15 categories, draw a cause-effect diagram to illustrate the relationships among factors that exist in the distribution system, and point out some major factors in studying the distribution system with the lateral transshipment. Then, we propose a model of “integrated purchasing and rationed distributing” to operate a two-echelon distribution system. Some valuable conclusions were obtained from this model. Finally, we prove that the model of “integrated purchasing and rationed distributing” is efficient in operating a two-echelon distribution system in which multiple demands within one period as well as lateral transshipment were permitted.