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http://dx.doi.org/10.7737/JKORMS.2014.39.4.153

The Impact of Capacity Flexibility in a Rental Operation on the Financial Performance  

Kim, Eungab (College of Business Administration, Ewha Womans University)
Publication Information
Journal of the Korean Operations Research and Management Science Society / v.39, no.4, 2014 , pp. 153-165 More about this Journal
Abstract
We present a new framework for rental capacity management in which rental capacity is dynamically managed by means of temporary inventory addition/return. While serving customers with its own (native) capacity, the rental firm rents additional rental capacity from an upper echelon rental company so that it can avoid lost sales which may occur when stock is not sufficient, and returns it when stock becomes sufficiently large enough to cope with demands. Formulating the model as a Markov decision process, we investigate a flexible capacity addition/return policy that maximizes the firm's profit with respect to system costs. Numerical study indicates that rental operation with capacity addition/return can be economically favorable over rental operation without capacity expansion/return and can contribute the reduction in the size of native rental capacity.
Keywords
Rental Operation; Flexible Capacity Management; Reverse Logistics; Capacity Expansion/Reduction; Inventory management;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
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