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Dynamic warehouse size planning with demand forecast and contract flexibility

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  • Ye Shi
  • Xiaolong Guo
  • Yugang Yu

Abstract

This paper develops a dynamic warehouse planning model incorporating demand forecast and contract flexibility, and addresses how demand forecast and contract flexibility affect warehouse size planning. In this model, a manager announces a nominal size of the warehouse space to rent before the planning horizon begins (strategic decision), and determines the ordering quantity and actual warehouse size during the horizon (operational decision). In particular, the manager can adjust the actual warehouse size within a range according to dynamically updating demand forecast during the horizon, which reflects the contract flexibility. We start with the characterisation of the operational decision. For any given nominal size, we show the monotonicity of optimal inventory replenishment and warehousing decisions w.r.t. demand forecast and contract flexibility. However, this monotonicity does not necessarily hold for the strategic choice of the nominal size. Finally, a case study is presented to investigate the interaction between demand forecast information and contract flexibility. We find that the value of demand forecast can be enhanced as the contract flexibility improves. However, more forecasted demands do not imply higher value of contract flexibility.

Suggested Citation

  • Ye Shi & Xiaolong Guo & Yugang Yu, 2018. "Dynamic warehouse size planning with demand forecast and contract flexibility," International Journal of Production Research, Taylor & Francis Journals, vol. 56(3), pages 1313-1325, February.
    • Handle: RePEc:taf:tprsxx:v:56:y:2018:i:3:p:1313-1325
    DOI: 10.1080/00207543.2017.1336680
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    Cited by:

    1. Shi, Ye & Yu, Yugang & Dong, Yuxuan, 2021. "Warehousing platform’s revenue management: A dynamic model of coordinating space allocation for self-use and rent," European Journal of Operational Research, Elsevier, vol. 293(1), pages 167-176.
    2. Mohammed Alnahhal & Bashir Salah & Mohammed Ruzayqat, 2022. "An Efficient Approach to Investigate the Tradeoff between Double Handling and Needed Capacity in Automated Distribution Centers," Sustainability, MDPI, vol. 14(13), pages 1-25, June.
    3. Karatas, Mumtaz & Eriskin, Levent, 2023. "Linear and piecewise linear formulations for a hierarchical facility location and sizing problem," Omega, Elsevier, vol. 118(C).
    4. Aghajani, Mojtaba & Ali Torabi, S. & Altay, Nezih, 2023. "Resilient relief supply planning using an integrated procurement-warehousing model under supply disruption," Omega, Elsevier, vol. 118(C).
    5. Zhang, Guoqing & Shang, Xiaoting & Alawneh, Fawzat & Yang, Yiqin & Nishi, Tatsushi, 2021. "Integrated production planning and warehouse storage assignment problem: An IoT assisted case," International Journal of Production Economics, Elsevier, vol. 234(C).
    6. Jiawu Peng & Yue Zhao & Lili Dai, 2023. "Equilibrium Strategy of Production and Order in a Two-Echelon Supply Chain with Demand Information Updates and Capacity Restriction," Mathematics, MDPI, vol. 11(23), pages 1-32, November.

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