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Optimization of Capacity Allocation Models with Effort Dependent Demand in Global Supply Chain

Author

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  • Seungbeom Kim

    (College of Business Administration, Hongik University, Seoul 04066, Korea)

  • Kwanghun Chung

    (College of Business Administration, Hongik University, Seoul 04066, Korea)

Abstract

In a demand driven market, optimal allocation of capacity to the demand has been one of the major issues. In this paper, we consider a single global freight firm allocating its capacity to its own regional sales offices. The firm sells cargo space based on two types of contracts: long-term and spot sales. Regional sales offices utilize their effort to generate more demand in their designated region. In other words, it is assumed that the demand is dependent on their efforts. First, we find a closed-form solution for the optimal level of the efforts of a single sales office in a specific region. Then, we study the case when the firm allocates its limited total capacity to two sales offices. We investigate different methods of capacity allocation: decentralization, centralization, and mixed, by conducting numerical studies. Different from the traditional finding, we suggest that the decentralization method is not always dominated by the centralization method.

Suggested Citation

  • Seungbeom Kim & Kwanghun Chung, 2022. "Optimization of Capacity Allocation Models with Effort Dependent Demand in Global Supply Chain," Sustainability, MDPI, vol. 14(3), pages 1-19, January.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:3:p:1375-:d:733866
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    References listed on IDEAS

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    1. Crainic, Teodor Gabriel & Perboli, Guido & Rosano, Mariangela, 2018. "Simulation of intermodal freight transportation systems: a taxonomy," European Journal of Operational Research, Elsevier, vol. 270(2), pages 401-418.
    2. Meiqin Suo & Feng Xia & Yurui Fan, 2022. "A Fuzzy-Interval Dynamic Optimization Model for Regional Water Resources Allocation under Uncertainty," Sustainability, MDPI, vol. 14(3), pages 1-20, January.
    3. 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.
    4. Hua Xing & Shuhong Mo & Xiaoyan Liang & Ying Li, 2021. "Water Resources Allocation Based on Complex Adaptive System Theory in the Inland River Irrigation District," Sustainability, MDPI, vol. 13(15), pages 1-19, July.
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    1. Elena N. Shaforostova & Olga V. Kosareva-Volod’ko & Olga V. Belyankina & Danila Y. Solovykh & Ekaterina S. Sazankova & Elena I. Sizova & Danila A. Adigamov, 2023. "A Tailing Dump as Industrial Deposit; Study of the Mineralogical Composition of Tailing Dump of the Southern Urals and the Possibility of Tailings Re-Development," Resources, MDPI, vol. 12(2), pages 1-13, February.

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