Competition under Dynamic Lot Sizing Costs with Capacity Acquisition
Lot-sizing and capacity planning are important supply chain decisions, and competition and cooperation affect the performance of these decisions. In this paper, we look into the dynamic lot sizing and resource competition problem of an industry consisting of multiple firms. A capacity competition model combining the complexity of time-varying demand with cost functions and economies os scale arising from dynamic lot-sizing costs is developed. Each firm can replenish inventory at the beginning of each period in a finite planning horizon. Fixed as well as variable production costs incur for each production setup, along with inventory carrying costs. The individual production lots of each firm are limited by a constant capacity restriction, which is purchased up front for the planning horizon. The capacity can be purchased from a spot market, and the capacity acquisition cost fluctuates with the total capacity demand of all the competing firms. We solve the competition model and establish the existence of a capacity equilibrium over the firms and the associated optimal dynamic lot-sizing plan for each firm under mild conditions.
|Date of creation:||Jun 2006|
|Date of revision:||Apr 2010|
|Publication status:||Published in International Journal of Production Economics Vol 131, Issue 2 (June 2011), pp 535-544.|
|Contact details of provider:|| Web page: http://www.lums.lancs.ac.uk/departments/ManSci/|
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kenneth R. Baker & Paul Dixon & Michael J. Magazine & Edward A. Silver, 1978. "An Algorithm for the Dynamic Lot-Size Problem with Time-Varying Production Capacity Constraints," Management Science, INFORMS, vol. 24(16), pages 1710-1720, December.
- Vives, Xavier, 1990.
"Nash equilibrium with strategic complementarities,"
Journal of Mathematical Economics,
Elsevier, vol. 19(3), pages 305-321.
- Jan A. Van Mieghem, 1999. "Coordinating Investment, Production, and Subcontracting," Management Science, INFORMS, vol. 45(7), pages 954-971, July.
- Gabriel R. Bitran & Horacio H. Yanasse, 1982. "Computational Complexity of the Capacitated Lot Size Problem," Management Science, INFORMS, vol. 28(10), pages 1174-1186, October.
- Akbalik, Ayse & Penz, Bernard, 2009. "Exact methods for single-item capacitated lot sizing problem with alternative machines and piece-wise linear production costs," International Journal of Production Economics, Elsevier, vol. 119(2), pages 367-379, June.
- Kirca, Omer, 1990. "An efficient algorithm for the capacitated single item dynamic lot size problem," European Journal of Operational Research, Elsevier, vol. 45(1), pages 15-24, March.
- Harrison, J. Michael & Van Mieghem, Jan A., 1999. "Multi-resource investment strategies: Operational hedging under demand uncertainty," European Journal of Operational Research, Elsevier, vol. 113(1), pages 17-29, February.
- Roller, Lars-Hendrik & Sickles, Robin C., 2000.
"Capacity and product market competition: measuring market power in a 'puppy-dog' industry,"
International Journal of Industrial Organization,
Elsevier, vol. 18(6), pages 845-865, August.
- Lars-Hendrik Röller & Robin C. Sickles, 1997. "Capacity and Product Market Competition: Measuring Market Power in a "Puppy-Dog" Industry," CIG Working Papers FS IV 97-31, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Jan A. Van Mieghem & Nils Rudi, 2002. "Newsvendor Networks: Inventory Management and Capacity Investment with Discretionary Activities," Manufacturing & Service Operations Management, INFORMS, vol. 4(4), pages 313-335, August.
- Alper Atamtürk & Dorit S. Hochbaum, 2001. "Capacity Acquisition, Subcontracting, and Lot Sizing," Management Science, INFORMS, vol. 47(8), pages 1081-1100, August.
- Dong X. Shaw & Albert P. M. Wagelmans, 1998. "An Algorithm for Single-Item Capacitated Economic Lot Sizing with Piecewise Linear Production Costs and General Holding Costs," Management Science, INFORMS, vol. 44(6), pages 831-838, June.
- 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.
- Michael Florian & Morton Klein, 1971. "Deterministic Production Planning with Concave Costs and Capacity Constraints," Management Science, INFORMS, vol. 18(1), pages 12-20, September.
- Arnold, Jan & Minner, Stefan & Eidam, Björn, 2009. "Raw material procurement with fluctuating prices," International Journal of Production Economics, Elsevier, vol. 121(2), pages 353-364, October.
- Harvey M. Wagner & Thomson M. Whitin, 1958. "Dynamic Version of the Economic Lot Size Model," Management Science, INFORMS, vol. 5(1), pages 89-96, October.
- Jan A. Van Mieghem, 1998. "Investment Strategies for Flexible Resources," Management Science, INFORMS, vol. 44(8), pages 1071-1078, August.
When requesting a correction, please mention this item's handle: RePEc:lms:mansci:mrg-0006. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joern Meissner)
If references are entirely missing, you can add them using this form.