Manufacturer’s Flexible Capacity Decision Under Supply-demand Misalignment

Capacity decision is one of the most important strategies for manufacturers.Considering the large investment,long construction lead-time and high demand fluctuations,manufacturers always make capacity decision with demand uncertainty,which further causes the supply-demand misalignment.A traditional way to eliminate the mismatch is adopting flexible capacity.With flexible capacity,manufacturers are able to shorten production lead time so that actual manufacturing can be postponed via some effort until market demand information becomes fully accessible.In addition to building flexible capacity,with the rapid development of technology,new measures resolving supply-demand mismatch such as capacity sharing and demand information sharing are continuously rising.This dissertation comprehensively analyzes the optimal capacity decisions in different situations and focuses on the strategy interaction of flexible capacity decision and these new measures.The specific contents are listed as follows:First,facing supply-demand misalignment resulting from green product,this dissertation explores the manufacturers’ flexible capacity decisions of green product with emission constraint under demand uncertainty.This dissertation investigates green capacity strategies and production volume portfolio for two homogenous firms producing both green products and traditional products.Each firm utilizes either inflexible capacity or flexible capacity which can postpone production after demand is observed.Results indicate that as the green product becomes more advantaged,flexible capacity advantage weakens and firms prefer inflexible capacity.Firms choose different capacity types when capacity investment costs are close;otherwise,they adopt the costadvantaged type.A prisoner’s dilemma arises when inflexible capacity is relatively cost-advantaged,which is mitigated by Nash negotiation.Second,facing supply-demand misalignment,this dissertation explores the strategic relationship between capacity sharing and flexible capacity under duopoly competition.This dissertation develops a game model of two symmetric firms with demand correlation,and compares their optimal capacity strategies under two scenarios: with and without capacity sharing.Results show that flexible capacity and capacity sharing may be either complements or substitutes.Specifically,counter intuitively,when capacity costs are relatively high,these two methods are complemented;otherwise,they are substituted.Moreover,a higher demand correlation between firms always decreases substitutability while increases complementarity when the capacity transfer price is relatively low.In addition,a higher capacity transfer price also reduces substitutability and reinforces complementarity.Lastly,facing supply-demand misalignment,this dissertation explores how does information-sharing strategy effect flexible capacity strategy.This dissertation builds a supply chain with a manufacturer and a retailer,where the manufacturer builds the capacity and sets the wholesale price,and the retailer sets retail price and holds the advantage of demand information.This part focuses on the retailer’s incentive for sharing private forecast information which is made to affect the follow-up action of manufacturer’s flexible capacity choice.It is shown that if the market fluctuation is relatively large,the manufacturer is more willing to choose flexible capacity under information sharing than under no information sharing;otherwise,the manufacturer is less willing to choose flexible capacity under information sharing than under no information sharing.Further,when the investment cost is relatively large and market fluctuation is relatively small,there may arise a prisoner’s dilemma,such that neither means(information sharing or flexible capacity)is taken,but higher profits are attained through implementing the two means.Last,if information-sharing commitment is made after flexible capacity choice,the retailer never shares the forecast information when the manufacturer commits to choosing flexible capacity,which enlarges the system parameter region for the prisoner’s dilemma occurring.Thus,it is optimal for both parties with the information-sharing decision made before flexible capacity choice.This dissertation investigates flexible capacity,capacity sharing and information sharing in combination,and systematically builds the research framework of solving the misalignment between supply and demand.It provides theoretical basis and management insights for manufacturers to implement reasonable strategies,so as to reduce the loss caused by uncertain demand.