Collaborative Research: Resource and Demand Allocation in Dynamic Environments

New York University, New York NY

Investigators

Abstract

In this project we focus on the class of capacity planning and resource allocation problems in which customers view waiting times as one of their major concerns. The objective is to develop a methodology for joint optimal capacity planning and demand allocation for such problems. An important phase in this project is to develop an understanding of customer reactions to capacity allocation rules. The project will be conducted through the following steps: (i) Develop mathematical models for the joint capacity planning and demand allocation problem. (ii) Determine structural properties of the main sub-components of the problem, viz., capacity planning and demand allocation, including customer's individual optimization for any given capacity allocation. (iii) Develop optimal combined capacity planning and demand allocation algorithms for use in diverse settings. The expected output of this project includes theoretical insight as well as algorithms for capacity planning and demand allocation in dynamic environments that will be of use to manufacturing managers, supply chain managers, distribution systems planners, and service operations managers. Growing global competition and rapid changes in information technology are forcing companies to pay more attention to customer needs and system responsiveness; service delivery has become a key factor in improving a company's competitive position. Many US companies have expanded both nationally and internationally not only to take advantage of tariff, labor and other incentives but also to provide better customer service. These firms, both manufacturing and service, operate over a wide-spread geographic area and face a dynamic environment in which there are random changes in demand within and across geographic boundaries. However, capacity planning alone will not guarantee success in such global diversification ventures. In most realistic situations, even though customers can be served by any one of many regional facilities, some customers may have a natural affinity for being served at a specific facility because of time or cost considerations. On the other hand, as the capacity at one location is expanded, more customers are attracted from other regions to this location for service. The overall effect of these inter-region flows can deteriorate the performance at some facilities while other facilities remain underutilized. This project develops methodologies and understanding for these capacity allocation problems by taking into consideration how customers react to the firm's allocation decisions.