An analytic approach to production capacity allocation and supply chain design

The aim of this paper is to propose a framework by which the risks related to a customer–supplier relationship, the service requirements by the customers and the strategies of the supplier company can be included in production capacity allocation and supply chain design. Essentially, the target is to prepare a sales plan where the limited production capacity is allocated to the customers based on their strategic importance and the risk involved. Furthermore, the supply chain is designed on the basis of the customers' strategic importance and service requirements. The framework is demonstrated with a numerical example and it is based on integrating the analytic hierarchy process and mixed integer programming (MIP).