 Decentral allocation planning in multi-stage customer hierarchiesSebastian Vogel and Herbert Meyr European Journal of Operational Research, 2015, vol. 246, issue 2, 462-470 Abstract: This paper presents a novel allocation scheme to improve profits when splitting a scarce product among customer segments. These segments differ by demand and margin and they form a multi-level tree, e.g. according to a geography-based organizational structure. In practice, allocation has to follow an iterative process in which higher level quotas are disaggregated one level at a time, only based on local, aggregate information. We apply well-known econometric concepts such as the Lorenz curve and Theil’s index of inequality to find a non-linear approximation of the profit function in the customer tree. Our resulting Approximate Profit Decentral Allocation (ADA) scheme ensures that a group of truthfully reporting decentral planners makes quasi-coordinated decisions in support of overall profit-maximization in the hierarchy. The new scheme outperforms existing simple rules by a large margin and comes close to the first-best theoretical solution under a central planner and central information. Keywords: Supply chain management; Demand fulfillment; Allocation planning; Customer hierarchies; Customer heterogeneity (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:246:y:2015:i:2:p:462-470 DOI: 10.1016/j.ejor.2015.05.009 Access Statistics for this article European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati More articles in European Journal of Operational Research from Elsevier |
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