Budget Allocation for Permanent and Contingent Capacity under Stochastic Demand

Dellaert, Nico; Jeunet, Jully

Dellaert, Nico; Jeunet, Jully (2009), Budget Allocation for Permanent and Contingent Capacity under Stochastic Demand, 23rd European Conference on Operational Research, 2009-07, Bonn, Allemagne

Type

Communication / Conférence

Date

2009

Conference title

23rd European Conference on Operational Research

Conference date

2009-07

Conference city

Bonn

Conference country

Allemagne

Metadata

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Author(s)

Dellaert, Nico
Jeunet, Jully

Abstract (EN)

We model budgeted services with permanent and contingent capacity costs. We consider a stochastic demand of tasks to be performed. No backordering of tasks is allowed, capacity shortages are penalized in each week. We optimize the permanent capacity at the start of the year and the contingent capacity based on the weekly demand, several models are developed, with hard and soft budget constraints, and different capacity shortage penalty cost functions. We provide analytical results and perform numerical experiments, showing among others the optimal budget spending patterns.

Subjects / Keywords

Stochastic; Optimization; Non-linear stochastic dynamic programming; Budget allocation; Contingent workers; Capacity planning