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Integrated market selection and production planning: complexity and solution approaches

Listed author(s):
  • van den Heuvel, W.
  • Romeijn, H.E.
  • Wagelmans, A.P.M.
  • Kundakcioglu, O.E.

Emphasis on effective demand management is becoming increasingly recognized as an important factor in operations performance. Operations models that account for supply costs and constraints as well as a supplier's ability to in°uence demand characteristics can lead to an improved match between supply and demand. This paper presents a new class of optimization models that allow a supplier to select, from a set of potential markets, those markets that provide maximum profit when production/procurement economies of scale exist in the supply process. The resulting optimization problem we study possesses an interesting structure and we show that although the general problem is NP-complete, a number of relevant and practical special cases can be solved in polynomial time. We also provide a computationally very effcient and intuitively attractive heuristic solution procedure that performs extremely well on a large number of test instances.

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File URL: https://repub.eur.nl/pub/10776/EI%202007-45.pdf
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Paper provided by Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute in its series Econometric Institute Research Papers with number EI 2007-45.

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Date of creation: 01 Oct 2007
Handle: RePEc:ems:eureir:10776
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Web page: http://www.eur.nl/ese

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  1. Howard Kunreuther & Linus Schrage, 1973. "Joint Pricing and Inventory Decisions for Constant Priced Items," Management Science, INFORMS, vol. 19(7), pages 732-738, March.
  2. van den Heuvel, Wilco & Wagelmans, Albert P.M., 2006. "A polynomial time algorithm for a deterministic joint pricing and inventory model," European Journal of Operational Research, Elsevier, vol. 170(2), pages 463-480, April.
  3. Joseph Thomas, 1970. "Price-Production Decisions with Deterministic Demand," Management Science, INFORMS, vol. 16(11), pages 747-750, July.
  4. Awi Federgruen & Michal Tzur, 1991. "A Simple Forward Algorithm to Solve General Dynamic Lot Sizing Models with n Periods in 0(n log n) or 0(n) Time," Management Science, INFORMS, vol. 37(8), pages 909-925, August.
  5. Stephen M. Gilbert, 2000. "Coordination of Pricing and Multiple-Period Production Across Multiple Constant Priced Goods," Management Science, INFORMS, vol. 46(12), pages 1602-1616, December.
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