IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v118y2009i2p430-441.html
   My bibliography  Save this article

Capacity management in order-driven production networks--A flexibility-oriented approach to determine the size of a network capacity pool

Author

Listed:
  • Ahlert, Klaus-Henning
  • Corsten, Hans
  • Gössinger, Ralf

Abstract

Assuming heterarchical production networks, capacity management is faced with uncertainties of both network orders and network capacity. In order to deal with these uncertainties we propose a flexible approach that combines capacity-oriented pricing with two modes of providing network capacity: capacity on demand and network capacity pool. Flexibility of this approach arises from additional degrees of freedom for matching capacity supply and demand. The central problem of sizing the network capacity pool is solved iteratively by a decentralised planning process applying the top-down/bottom-up principle. In this paper we present the underlying formal models of the corporate level and the network level as well as the coordination procedure. In order to illustrate the approach, we provide a continued numerical example.

Suggested Citation

  • Ahlert, Klaus-Henning & Corsten, Hans & Gössinger, Ralf, 2009. "Capacity management in order-driven production networks--A flexibility-oriented approach to determine the size of a network capacity pool," International Journal of Production Economics, Elsevier, vol. 118(2), pages 430-441, April.
  • Handle: RePEc:eee:proeco:v:118:y:2009:i:2:p:430-441
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925-5273(08)00390-3
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    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. E. Andrew Boyd & Ioana C. Bilegan, 2003. "Revenue Management and E-Commerce," Management Science, INFORMS, vol. 49(10), pages 1363-1386, October.
    2. Barut, M. & Sridharan, V, 2004. "Design and evaluation of a dynamic capacity apportionment procedure," European Journal of Operational Research, Elsevier, vol. 155(1), pages 112-133, May.
    3. Kevin Pak & Nanda Piersma, 2002. "overview of OR techniques for airline revenue management," Statistica Neerlandica, Netherlands Society for Statistics and Operations Research, vol. 56(4), pages 479-495, November.
    4. Aleksandar Pekev{c} & Michael H. Rothkopf, 2003. "Combinatorial Auction Design," Management Science, INFORMS, vol. 49(11), pages 1485-1503, November.
    5. Paul R. Kleindorfer & D. J. Wu, 2003. "Integrating Long- and Short-Term Contracting via Business-to-Business Exchanges for Capital-Intensive Industries," Management Science, INFORMS, vol. 49(11), pages 1597-1615, November.
    6. Guillermo Gallego & Garrett van Ryzin, 1997. "A Multiproduct Dynamic Pricing Problem and Its Applications to Network Yield Management," Operations Research, INFORMS, vol. 45(1), pages 24-41, February.
    7. Frank Kelly & Richard Steinberg, 2000. "A Combinatorial Auction with Multiple Winners for Universal Service," Management Science, INFORMS, vol. 46(4), pages 586-596, April.
    8. J. Carlos Jarillo, 1988. "On strategic networks," Strategic Management Journal, Wiley Blackwell, vol. 9(1), pages 31-41, January.
    9. Yossi Sheffi, 2004. "Combinatorial Auctions in the Procurement of Transportation Services," Interfaces, INFORMS, vol. 34(4), pages 245-252, August.
    10. Cattani, Kyle D. & Dahan, Ely & Schmidt, Glen M., 2008. "Tailored capacity: Speculative and reactive fabrication of fashion goods," International Journal of Production Economics, Elsevier, vol. 114(2), pages 416-430, August.
    11. Jeffrey I. McGill & Garrett J. van Ryzin, 1999. "Revenue Management: Research Overview and Prospects," Transportation Science, INFORMS, vol. 33(2), pages 233-256, May.
    12. Dudek, Gregor, 2004. "Collaborative planning in supply chains : a negotiation based approach," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 20676, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    13. Milgrom,Paul, 2004. "Putting Auction Theory to Work," Cambridge Books, Cambridge University Press, number 9780521536721.
    14. Tang, Christopher S., 2006. "Perspectives in supply chain risk management," International Journal of Production Economics, Elsevier, vol. 103(2), pages 451-488, October.
    15. Mathur, Puneet Prakash & Shah, Janat, 2008. "Supply chain contracts with capacity investment decision: Two-way penalties for coordination," International Journal of Production Economics, Elsevier, vol. 114(1), pages 56-70, July.
    16. Saif Benjaafar & William L. Cooper & Joon-Seok Kim, 2005. "On the Benefits of Pooling in Production-Inventory Systems," Management Science, INFORMS, vol. 51(4), pages 548-565, April.
    17. Pak, K. & Piersma, N., 2002. "airline revenue management," ERIM Report Series Research in Management ERS-2002-12-LIS, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    18. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, March.
    19. Hans B. Thorelli, 1986. "Networks: Between markets and hierarchies," Strategic Management Journal, Wiley Blackwell, vol. 7(1), pages 37-51, January.
    20. Edieal J. Pinker & Abraham Seidmann & Yaniv Vakrat, 2003. "Managing Online Auctions: Current Business and Research Issues," Management Science, INFORMS, vol. 49(11), pages 1457-1484, November.
    21. D. J. Wu & Paul R. Kleindorfer, 2005. "Competitive Options, Supply Contracting, and Electronic Markets," Management Science, INFORMS, vol. 51(3), pages 452-466, March.
    22. Ananth V. Iyer & Apurva Jain, 2004. "Modeling the Impact of Merging Capacity in Production-Inventory Systems," Management Science, INFORMS, vol. 50(8), pages 1082-1094, August.
    23. S.J. Rassenti & V.L. Smith & R.L. Bulfin, 1982. "A Combinatorial Auction Mechanism for Airport Time Slot Allocation," Bell Journal of Economics, The RAND Corporation, vol. 13(2), pages 402-417, Autumn.
    24. Klein, Robert, 2001. "Revenue Management: quantitative Methoden zur Erlösmaximierung in der Dienstleistungsproduktion," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 16582, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    25. Walther, Grit & Schmid, Eberhard & Spengler, Thomas S., 2008. "Negotiation-based coordination in product recovery networks," International Journal of Production Economics, Elsevier, vol. 111(2), pages 334-350, February.
    26. Wedad Elmaghraby & P{i}nar Keskinocak, 2003. "Dynamic Pricing in the Presence of Inventory Considerations: Research Overview, Current Practices, and Future Directions," Management Science, INFORMS, vol. 49(10), pages 1287-1309, October.
    27. Schneeweiss, Ch. & Schneider, H., 1999. "Measuring and designing flexibility as a generalized service degree," European Journal of Operational Research, Elsevier, vol. 112(1), pages 98-106, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Toly Chen & Yu-Cheng Lin, 2017. "A digital equipment identifier system," Journal of Intelligent Manufacturing, Springer, vol. 28(5), pages 1159-1169, June.
    2. Das, Kanchan, 2011. "Integrating effective flexibility measures into a strategic supply chain planning model," European Journal of Operational Research, Elsevier, vol. 211(1), pages 170-183, May.
    3. Xie, Wenming & Jiang, Zhibin & Zhao, Yingxue & Hong, Junjie, 2014. "Capacity planning and allocation with multi-channel distribution," International Journal of Production Economics, Elsevier, vol. 147(PA), pages 108-116.

    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. Irene Ng & Nick K.T. Yip, 2009. "Mechanism design in an integrated approach towards revenue management: the case of Empress Cruise Lines," The Service Industries Journal, Taylor & Francis Journals, vol. 31(3), pages 469-482, February.
    2. Meng, Qiang & Zhao, Hui & Wang, Yadong, 2019. "Revenue management for container liner shipping services: Critical review and future research directions," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 280-292.
    3. Arthur M. Geoffrion & Ramayya Krishnan, 2003. "E-Business and Management Science: Mutual Impacts (Part 2 of 2)," Management Science, INFORMS, vol. 49(11), pages 1445-1456, November.
    4. Arthur M. Geoffrion & Ramayya Krishnan, 2003. "E-Business and Management Science: Mutual Impacts (Part 1 of 2)," Management Science, INFORMS, vol. 49(10), pages 1275-1286, October.
    5. Syed Asif Raza & Rafi Ashrafi & Ali Akgunduz, 2020. "A bibliometric analysis of revenue management in airline industry," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 19(6), pages 436-465, December.
    6. Scott Duke Kominers & Alexander Teytelboym & Vincent P Crawford, 2017. "An invitation to market design," Oxford Review of Economic Policy, Oxford University Press, vol. 33(4), pages 541-571.
    7. Pickl, Matthias & Wirl, Franz, 2011. "Auction design for gas pipeline transportation capacity--The case of Nabucco and its open season," Energy Policy, Elsevier, vol. 39(4), pages 2143-2151, April.
    8. Ronald M. Harstad & Aleksandar Saša Pekeč, 2008. "Relevance to Practice and Auction Theory: A Memorial Essay for Michael Rothkopf," Interfaces, INFORMS, vol. 38(5), pages 367-380, October.
    9. G. Anandalingam & Robert W. Day & S. Raghavan, 2005. "The Landscape of Electronic Market Design," Management Science, INFORMS, vol. 51(3), pages 316-327, March.
    10. Blumrosen, Liad & Nisan, Noam, 2010. "Informational limitations of ascending combinatorial auctions," Journal of Economic Theory, Elsevier, vol. 145(3), pages 1203-1223, May.
    11. Doukidis, Georgios I. & Pramatari, Katerina & Lekakos, Georgios, 2008. "OR and the management of electronic services," European Journal of Operational Research, Elsevier, vol. 187(3), pages 1296-1309, June.
    12. Yan Chen & Peter Cramton & John A. List & Axel Ockenfels, 2021. "Market Design, Human Behavior, and Management," Management Science, INFORMS, vol. 67(9), pages 5317-5348, September.
    13. Jawad Abrache & Teodor Crainic & Michel Gendreau & Monia Rekik, 2007. "Combinatorial auctions," Annals of Operations Research, Springer, vol. 153(1), pages 131-164, September.
    14. Modarres, Mohammad & Sharifyazdi, Mehdi, 2009. "Revenue management approach to stochastic capacity allocation problem," European Journal of Operational Research, Elsevier, vol. 192(2), pages 442-459, January.
    15. Torsten J. Gerpott & Jan Berends, 2022. "Competitive pricing on online markets: a literature review," Journal of Revenue and Pricing Management, Palgrave Macmillan, vol. 21(6), pages 596-622, December.
    16. Haerian, Laila & Homem-de-Mello, Tito & Mount-Campbell, Clark A., 2006. "Modeling revenue yield of reservation systems that use nested capacity protection strategies," International Journal of Production Economics, Elsevier, vol. 104(2), pages 340-353, December.
    17. Dasci, A. & Karakul, M., 2009. "Two-period dynamic versus fixed-ratio pricing in a capacity constrained duopoly," European Journal of Operational Research, Elsevier, vol. 197(3), pages 945-968, September.
    18. Soumyakanti Chakraborty & Anup K. Sen & Amitava Bagchi, 2015. "Addressing the valuation problem in multi-round combinatorial auctions," Information Systems Frontiers, Springer, vol. 17(5), pages 1145-1160, October.
    19. Kursad Derinkuyu & Fehmi Tanrisever & Nermin Kurt & Gokhan Ceyhan, 2020. "Optimizing Day-Ahead Electricity Market Prices: Increasing the Total Surplus for Energy Exchange Istanbul," Manufacturing & Service Operations Management, INFORMS, vol. 22(4), pages 700-716, July.
    20. Lingxiu Dong & Panos Kouvelis & Zhongjun Tian, 2009. "Dynamic Pricing and Inventory Control of Substitute Products," Manufacturing & Service Operations Management, INFORMS, vol. 11(2), pages 317-339, 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:proeco:v:118:y:2009:i:2:p:430-441. 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/locate/ijpe .

    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.