Delivery-date and capacity management in a decentralized internal market

Murat Erkoc, S. David Wu, Haresh Gurnani

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

We study competitive due-date and capacity management between the marketing and engineering divisions within an engineer-to-order (ETO) firm. Marketing interacts directly with the customers and quotes due-dates for their orders. Engineering is primarily concerned with the efficient utilization of resources and is willing to increase capacity if the cost is compensated. The two divisions share the responsibility for timely delivery of the jobs. We model the interaction between marketing and engineering as a Nash game and investigate the effect of internal competition on the equilibrium decisions. We observe that the internal competition not only degrades the firm's overall profitability but also the serviceability. Finally, we extend our analysis to multiple-job settings that consider both flexible and inflexible capacity.

Original languageEnglish (US)
Pages (from-to)390-405
Number of pages16
JournalNaval Research Logistics
Volume55
Issue number5
DOIs
StatePublished - Aug 1 2008

Keywords

  • Due-date quotation
  • Marketing/manufacturing interface
  • Serviceability
  • Supermodular games
  • Tardiness

ASJC Scopus subject areas

  • Management Science and Operations Research

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