Emphasis on effective demand management is becoming increasingly recognized as an important factor in operations performance. Operations models that account for supply costs and constraints as well as a supplier's ability to influence demand characteristics can lead to an improved match between supply and demand. This paper presents a class of optimization models that allow a supplier to select, from a set of potential markets, those markets that provide maximum profit when production/procurement economies of scale exist in the supply process. The resulting optimization problem we study possesses an interesting structure and we show that although the general problem is NP -complete, a number of relevant and practical special cases can be solved in polynomial time. We also provide a computationally very efficient and intuitively attractive heuristic solution procedure that performs extremely well on a large number of test instances.

Additional Metadata
Keywords Complexity, Lot-sizing, Market selection
Persistent URL dx.doi.org/10.1007/s10107-011-0441-7, hdl.handle.net/1765/23233
Series ERIM Top-Core Articles , Econometric Institute Reprint Series
Journal Mathematical Programming
Citation
van den Heuvel, W, Kundakcioglu, O.E, Geunes, J, Romeijn, H.E, Sharkey, T.C, & Wagelmans, A.P.M. (2012). Integrated market selection and production planning: Complexity and solution approaches. Mathematical Programming, 134(2), 395–424. doi:10.1007/s10107-011-0441-7