Design of a sales plan in a hybrid contractual and non-contractual context in a setting of limited capacity: A robust approach

Daniel Filipe Pereira, José Fernando Oliveira and Maria Antónia Carravilla

International Journal of Production Economics, 2023, vol. 260, issue C

Abstract: Many companies face capacity limitations that impair them to satisfy potential demand. In this context, sales/marketing teams have to decide which demand segments the company should prioritize. In business-to-business contexts, it is common that this selection includes customers with and without a contract. On the operations side, the production teams are interested in finding the most efficient usage for the available capacity. However, decision-making approaches to face such a challenge are scarce. In this paper, we propose a scenario-based robust optimization model to support the sales and marketing teams to define the most profitable sales plan in a setting of limited capacity, to serve multiple customers that can be either non-contractual or operate under quantity-flexibility contracts. The proposed model integrates contract design, portfolio selection, and tactical production planning decisions. By employing our model, we are able to quantify how a product’s inclusion in a contract relates not only to its own profitability but also to the profitability of the remaining products that might be offered to the customer using the same resources. Regarding the optimal flexibility level to offer to a customer, it is explained by the expected sales volume, the discount rate depending on the flexibility level, and the demand variability expectation. We expect this approach supports industrial companies in defining the mid-term sales plan and deciding on the conditions to offer to contract customers.

Keywords: Marketing-operations interface; Sales and operations planning; Contract design; Portfolio management; Demand management; Robust optimization (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:260:y:2023:i:c:s0925527323000993

DOI: 10.1016/j.ijpe.2023.108867

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