Study on Single Cycle Production Allocation and Supply Strategy for DCEs Based on the CVaR Criterion

Abstract

Direct chain enterprises (DCEs) face a decision-making issue as to how to allocate and supply their products to their stores for sales with the minimum losses and maximum profits for the manufacturers. This paper presents a single-cycle optimal allocation model for DCEs under the given total production amount and conditional value at risk loss. The optimal strategy for production allocation and supply is derived. Subsequently, an approximate algorithm for solving the optimal total production amount is presented. The optimal allocation and supply strategy, the minimum total production amount, the minimum allocation strategy, and the discount pricing strategy are obtained for the single cycle. Finally, with the sales data of a food DCE, numerical results corroborate that adopting different production and supply strategies reduces the risk of expected losses and increases the expected return. It is of an important theoretical significance in guiding the production and operation of direct chain enterprises.