A mathematical model for a capacity reservation contract
- Authors
- Park, Sung Il; Kim, Jong Soo
- Issue Date
- Mar-2014
- Publisher
- ELSEVIER SCIENCE INC
- Keywords
- Inventory management; Linear programming; Capacity reservation contract; Rolling-horizon; Mathematical modeling
- Citation
- APPLIED MATHEMATICAL MODELLING, v.38, no.5-6, pp.1866 - 1880
- Indexed
- SCIE
SCOPUS
- Journal Title
- APPLIED MATHEMATICAL MODELLING
- Volume
- 38
- Number
- 5-6
- Start Page
- 1866
- End Page
- 1880
- URI
- https://scholarworks.bwise.kr/erica/handle/2021.sw.erica/23662
- DOI
- 10.1016/j.apm.2013.10.005
- ISSN
- 0307-904X
- Abstract
- It is common practice in many industries to use a replenishment contract with a mechanism of capacity reservation. In this paper, we focus on a multi-period capacity reservation contract practiced between a buyer, who buys a single type of product and sells it to end-customers, and two or more heterogeneous suppliers, who produce and replenish the product as agreed upon contractually. In this paper, a mathematical model including several key features of a real contract is developed for a single supplier situation from the buyer's perspective. It is then extended to a multiple supplier model for a system in which there are several heterogeneous suppliers with different capacities and prices. A rolling-horizon implementation strategy is suggested for the efficient application of the models. Extensive computational experiments demonstrate that the model and strategy can produce cost effective contractual terms for the buyer within a few seconds. (C) 2013 Elsevier Inc. All rights reserved.
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