IDEAS home Printed from https://ideas.repec.org/a/eee/jomega/v65y2016icp55-68.html
   My bibliography  Save this article

Stock rationing under a profit satisficing objective

Author

Listed:
  • Pinto, Roberto

Abstract

This paper addresses a rationing problem with a profit satisficing objective in a company operating many retail stores through a centralized procurement. General rationing problems arise when the available stock or capacity cannot guarantee the possibility to satisfy the demand in full, and different decisions about the allocation of the available resources may lead to different profit results. Therefore, the appropriate allocation of the stock or capacity can have a substantial impact on the company’s profit. Unlike other works in the rationing area, this paper considers a profit satisficing objective, which entails maximizing the probability of achieving a pre-specified profit target. This type of objective is sometimes preferable to maximizing the expected profit. The problem is modeled in an analytical form, for which closed-form solutions are extremely hard to compute. Thus, the conditions for achieving the satisficing objective are discussed, and two heuristic procedures are compared: one exploiting the structure of the problem and resulting in a greedy, marginal unit allocation; the other, based on the Nelder–Mead derivative-free method.

Suggested Citation

  • Pinto, Roberto, 2016. "Stock rationing under a profit satisficing objective," Omega, Elsevier, vol. 65(C), pages 55-68.
  • Handle: RePEc:eee:jomega:v:65:y:2016:i:c:p:55-68
    DOI: 10.1016/j.omega.2015.12.008
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0305048315002571
    Download Restriction: Full text for ScienceDirect subscribers only

    File URL: https://libkey.io/10.1016/j.omega.2015.12.008?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zeynep Turgay & Fikri Karaesmen & E. Örmeci, 2015. "A dynamic inventory rationing problem with uncertain demand and production rates," Annals of Operations Research, Springer, vol. 231(1), pages 207-228, August.
    2. Johan Marklund & Kaj Rosling, 2012. "Lower Bounds and Heuristics for Supply Chain Stock Allocation," Operations Research, INFORMS, vol. 60(1), pages 92-105, February.
    3. Bodily, S. E. & Weatherford, L. R., 1995. "Perishable-asset revenue management: Generic and multiple-price yield management with diversion," Omega, Elsevier, vol. 23(2), pages 173-185, April.
    4. C Shi & B Chen, 2007. "Pareto-optimal contracts for a supply chain with satisficing objectives," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 58(6), pages 751-759, June.
    5. Pinto, Roberto, 2012. "Stock rationing under service level constraints in a vertically integrated distribution system," International Journal of Production Economics, Elsevier, vol. 136(1), pages 231-240.
    6. Fang, Lei, 2015. "Centralized resource allocation based on efficiency analysis for step-by-step improvement paths," Omega, Elsevier, vol. 51(C), pages 24-28.
    7. He, Xiuli & Khouja, Moutaz, 2011. "Pareto analysis of supply chain contracts under satisficing objectives," European Journal of Operational Research, Elsevier, vol. 214(1), pages 53-66, October.
    8. Fuchang Gao & Lixing Han, 2012. "Implementing the Nelder-Mead simplex algorithm with adaptive parameters," Computational Optimization and Applications, Springer, vol. 51(1), pages 259-277, January.
    9. Papier, Felix & Thonemann, Ulrich W., 2011. "Capacity rationing in rental systems with two customer classes and batch arrivals," Omega, Elsevier, vol. 39(1), pages 73-85, January.
    10. Karsu, Özlem & Morton, Alec, 2014. "Incorporating balance concerns in resource allocation decisions: A bi-criteria modelling approach," Omega, Elsevier, vol. 44(C), pages 70-82.
    11. Gérard P. Cachon & Martin A. Lariviere, 1999. "Capacity Choice and Allocation: Strategic Behavior and Supply Chain Performance," Management Science, INFORMS, vol. 45(8), pages 1091-1108, August.
    12. Shi, Chunming (Victor) & Yang, Shilei & Xia, Yu & Zhao, Xuan, 2011. "Inventory competition for newsvendors under the objective of profit satisficing," European Journal of Operational Research, Elsevier, vol. 215(2), pages 367-373, December.
    13. Russell R. Barton & John S. Ivey, Jr., 1996. "Nelder-Mead Simplex Modifications for Simulation Optimization," Management Science, INFORMS, vol. 42(7), pages 954-973, July.
    14. Francis de Véricourt & Fikri Karaesmen & Yves Dallery, 2002. "Optimal Stock Allocation for a Capacitated Supply System," Management Science, INFORMS, vol. 48(11), pages 1486-1501, November.
    15. Klein, Robert & Kolb, Johannes, 2015. "Maximizing customer equity subject to capacity constraints," Omega, Elsevier, vol. 55(C), pages 111-125.
    16. C Shi & B Chen, 2008. "Pareto quantity flexibility contracts for a supply chain under multiple objectives," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 59(5), pages 685-692, May.
    17. Chung, Chia-Shin & Flynn, James & Kuik, Roelof & Staliński, Piotr, 2013. "A single-period inventory placement problem for a supply system with the satisficing objective," European Journal of Operational Research, Elsevier, vol. 224(3), pages 520-529.
    18. Awi Federgruen & Henri Groenevelt, 1986. "The Greedy Procedure for Resource Allocation Problems: Necessary and Sufficient Conditions for Optimality," Operations Research, INFORMS, vol. 34(6), pages 909-918, December.
    19. Hvattum, Lars Magnus & Glover, Fred, 2009. "Finding local optima of high-dimensional functions using direct search methods," European Journal of Operational Research, Elsevier, vol. 195(1), pages 31-45, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chernonog, Tatyana & Avinadav, Tal & Ben-Zvi, Tal, 2019. "How to set price and quality in a supply chain of virtual products under bi-criteria and risk consideration," International Journal of Production Economics, Elsevier, vol. 209(C), pages 156-163.
    2. Yang, Shilei & Shi, Chunming (Victor) & Zhang, Yibin & Zhu, Jing, 2014. "Price competition for retailers with profit and revenue targets," International Journal of Production Economics, Elsevier, vol. 154(C), pages 233-242.
    3. Felix Papier, 2016. "Supply Allocation Under Sequential Advance Demand Information," Operations Research, INFORMS, vol. 64(2), pages 341-361, April.
    4. Banerjee, Pradeep K. & Turner, T. Rolf, 2012. "A flexible model for the pricing of perishable assets," Omega, Elsevier, vol. 40(5), pages 533-540.
    5. ElHafsi, Mohsen & Camus, Herve & Craye, Etienne, 2010. "Managing an integrated production inventory system with information on the production and demand status and multiple non-unitary demand classes," European Journal of Operational Research, Elsevier, vol. 207(2), pages 986-1001, December.
    6. Arcelus, F.J. & Kumar, Satyendra & Srinivasan, G., 2012. "Risk tolerance and a retailer's pricing and ordering policies within a newsvendor framework," Omega, Elsevier, vol. 40(2), pages 188-198, April.
    7. ElHafsi, Mohsen & Fang, Jianxin & Hamouda, Essia, 2021. "Optimal production and inventory control of multi-class mixed backorder and lost sales demand class models," European Journal of Operational Research, Elsevier, vol. 291(1), pages 147-161.
    8. Chernonog, Tatyana & Avinadav, Tal, 2014. "Profit criteria involving risk in price setting of virtual products," European Journal of Operational Research, Elsevier, vol. 236(1), pages 351-360.
    9. Avinadav, Tal & Chernonog, Tatyana & Perlman, Yael, 2014. "Analysis of protection and pricing strategies for digital products under uncertain demand," International Journal of Production Economics, Elsevier, vol. 158(C), pages 54-64.
    10. Pishchulov, Grigory & Richter, Knut, 2009. "Inventory rationing and sharing in pre-sell distribution with mobile communication technologies," International Journal of Production Economics, Elsevier, vol. 121(2), pages 584-600, October.
    11. Plaza, Malgorzata, 2016. "Balancing the costs of human resources on an ERP project," Omega, Elsevier, vol. 59(PB), pages 171-183.
    12. Shi, Chunming (Victor) & Yang, Shilei & Xia, Yu & Zhao, Xuan, 2011. "Inventory competition for newsvendors under the objective of profit satisficing," European Journal of Operational Research, Elsevier, vol. 215(2), pages 367-373, December.
    13. He, Xiuli & Khouja, Moutaz, 2011. "Pareto analysis of supply chain contracts under satisficing objectives," European Journal of Operational Research, Elsevier, vol. 214(1), pages 53-66, October.
    14. Chang, Kuo-Hao, 2015. "A direct search method for unconstrained quantile-based simulation optimization," European Journal of Operational Research, Elsevier, vol. 246(2), pages 487-495.
    15. Bing Lin & Shaoxiang Chen & Yi Feng & Jianjun Xu, 2018. "The Joint Stock and Capacity Rationings of a Make-To-Stock System with Flexible Demand," Asia-Pacific Journal of Operational Research (APJOR), World Scientific Publishing Co. Pte. Ltd., vol. 35(01), pages 1-27, February.
    16. Kalakbandi, Vinay Kumar, 2018. "Managing the misbehaving retailer under demand uncertainty and imperfect information," European Journal of Operational Research, Elsevier, vol. 269(3), pages 939-954.
    17. Jie Wu & Jun-Fei Chu & Liang Liang, 2016. "Target setting and allocation of carbon emissions abatement based on DEA and closest target: an application to 20 APEC economies," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 84(1), pages 279-296, November.
    18. Xu, Jianjun & Serrano, Alejandro & Lin, Bing, 2017. "Optimal production and rationing policy of two-stage tandem production system," International Journal of Production Economics, Elsevier, vol. 185(C), pages 100-112.
    19. Raza, Syed Asif & Rathinam, Sivakumar, 2017. "A risk tolerance analysis for a joint price differentiation and inventory decisions problem with demand leakage effect," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 129-145.
    20. Awi Federgruen & C. Daniel Guetta & Garud Iyengar, 2018. "Two‐echelon distribution systems with random demands and storage constraints," Naval Research Logistics (NRL), John Wiley & Sons, vol. 65(8), pages 594-618, December.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:65:y:2016:i:c:p:55-68. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.