Priority-Based Capacity Allocation for Hierarchical Distributors with Limited Production Capacity

Abstract

This paper studies the issue of capacity allocation in multi-rank distribution channel management, a topic that has been significantly overlooked in the existing literature. Departing from conventional approaches, hierarchical priority rules are introduced as constraints, and an innovative assignment integer programming model focusing on capacity selection is formulated. This model goes beyond merely optimizing profit or cost, aiming instead to enhance the overall business orientation of the firm. We propose a greedy algorithm and a priority-based binary particle swarm optimization (PB-BPSO) algorithm. Our numerical results indicate that both algorithms exhibit strong optimization capabilities and rapid solution speeds, especially in large-scale scenarios. Moreover, the model is validated through empirical tests using real-world data. The results demonstrate that the proposed approaches can provide actionable strategies to operators, in practice.