Satisfying market demands with delivery obligations or delivery charges

Authors:
Yongjun Xiao;Kevin Taaffe
Affiliations:
China Center for Information Industry Development, Beijing 100846, China;Department of Industrial Engineering, Clemson University, 110 Freeman Hall, Clemson, SC 29634, USA
Venue:
Computers and Operations Research
Year:
2010

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Abstract

Consider a firm that receives deterministic, time-varying demands for its product. The firm has the flexibility to choose its customer base and receive market-specific revenues for its product. In addition to market revenue and market demand, the parameters of a negotiated contract can also play a role in market selection and fulfillment decisions. Two such parameters are (1) delivery obligation penalties and (2) delivery charges. In this paper, we determine optimal solution approaches for problem settings when either of these contract parameters is present. Our tailored solution techniques can solve each problem in a fraction of the time required by a state-of-the-art commercial optimization solver.