Login | Register

Service customization under capacity constraints: an auction-based model


Service customization under capacity constraints: an auction-based model

Wang, Chun and Dargahi, Farnaz (2012) Service customization under capacity constraints: an auction-based model. Journal of Intelligent Manufacturing . ISSN 0956-5515

[thumbnail of wang2012b.pdf]
Text (application/pdf)
wang2012b.pdf - Accepted Version

Official URL: http://dx.doi.org/10.1007/s10845-012-0689-7


In mass customization, companies strive to enhance customer value by providing products and services that are approximate to customers’ needs. A company’s strategy of allocating its limited capacity to meeting diverse customer requirements directly impact customer perceived value in terms of available options, cost, and schedule. Proposed in this paper is an auction-based mass customization model for solving the problem of service customization under capacity constraints (SCCC). The proposed model integrates customers’ customization decision making with the allocation of company’s capacity through multilateral negotiation between the company and its customers. The negotiation is conducted through a combinatorial iterative auction designed to maximize the overall customer value given limited capacity. The auction is incentive-compatible in the sense that customers will follow the prescribed myopic best-response bidding strategy. Experimental results indicate that customization solutions computed by the proposed model are very close to the optimal one. Revenue performance is also adequate when there is sufficient competition in the market.

Divisions:Concordia University > Gina Cody School of Engineering and Computer Science > Concordia Institute for Information Systems Engineering
Item Type:Article
Authors:Wang, Chun and Dargahi, Farnaz
Journal or Publication:Journal of Intelligent Manufacturing
Digital Object Identifier (DOI):10.1007/s10845-012-0689-7
Keywords:Mass customization, capacity allocation, service customization, combinatorial iterative auction, multilateral negotiation, design by customers
ID Code:976811
Deposited By: Danielle Dennie
Deposited On:28 Jan 2013 16:55
Last Modified:18 Jan 2018 17:43


Anderson, E.W., Fornell, C., & Rust, R. T. (1997). Customer satisfaction, productivity, and profitability: Differences between goods and services. Marketing Science, 16(2), 129–145.
Baker, A. D. (1991), “Manufacturing Control with a Market-Driven Contract Net”, Ph.D. Thesis, Rensselaer Polytechnic Institute, Troy, NY.
Blecker, T., Abdelkafi, N., Kreutler, G., & Kaluza, B. (2004). Auction-based Variety Formation and Steering for Mass Customization. Electronic Markets, 14(3), 232-242.
Cao, J., Wang, J., Law, K., Zhang, S., & Li, M. (2006). An interactive service customization model. Information and Software Technology, 48(4), 280-296.
Chen, S., & Tseng, M. M. (2007). Aligning demand and supply flexibility in custom product co-design. International Journal of Flexible Manufacturing Systems, 19(4), 596-611.
Chen, S., & Tseng, M. M. (2010). A Negotiation-Credit-Auction mechanism for procuring customized products. International Journal of Production Economics, 127(1), 203-210.
Chokshi, N., & McFarlane, D. (2008). A distributed architecture for reconfigurable control of continuous process operations. Journal of Intelligent Manufacturing, 19(2), 215-232.
Clarke, E. H. (1971). Multipart pricing of public goods. Public choice, 11(1), 17-33.
Da Silveira, G., Borenstein, D., & Fogliatto, F. S. (2001). Mass customization: Literature review and research directions. International Journal of Production Economics, 72(1), 1-13.
de Vries, S., & Vohra, R. V. (2003). Combinatorial auctions: a survey. INFORMS Journal on Computing, 15(3), 284-309.
Du, X., Jiao, J., & Tseng, M. M. (2001). Architecture of product family: Fundamentals and methodology. Concurrent Engineering: Research and Application, 9(4), 309–325.
Fujishima, Y., Leyton-Brown, K., & Shoham, Y. (1999). Taming the computational complexity of combinatorial auctions: Optimal and approximate approaches, Sixteenth International Joint Conference on Artificial Intelligence (IJCAI) (pp. 548–553).
Groves, T. (1973). Incentives in teams. Econometrica: Journal of the Econometric Society, 617-631.
Guo, L., Hasegawa, T., Luh, P. B., Tamura, S., and Oblak, J.M. (1994), “Holonic Planning and Scheduling for a Robotic Assembly Testbed,” in Proceedings of the 4th International Conference on CIM and Automation Technology, (Troy, NY, October), IEEE, New York, pp. 142-149.
Hohner, G., Rich, J., Ng, E., Reid, G., Davenport, A. J., Kalagnanam, J. R., et al. (2003). Combinatorial and quantity-discount procurement auctions benefit Mars, Incorporated and its suppliers. Interfaces, 33(1), 23-35.
IntelliQuest, (1990), Conjoint Analysis: A Guide for Designing and Integrating Conjoint Studies, Marketing Research Technique Series Studies, American Marketing Association, Market Research Division, TX.
Jiao, J., & Tseng, M. M. (1999). A methodology of developing product family architecture for mass customization. Journal of Intelligent Manufacturing, 10(1), 3-20.
Jiao, J., Simpson, T., & Siddique, Z. (2007). Product family design and platform-based product development: a state-of-the-art review. Journal of Intelligent Manufacturing, 18(1), 5-29.
Lin, G. Y., and Solberg, J. J. (1992), “Integrated Shop Floor Control Using Autonomous Agents,” IIE Transactions, Vol. 24, No. 3, pp. 57-71.
Mas-Colell, A., Whinston, M. D., & Green, J. R. (1995). Microeconomics: Oxford University Press.
Meyer, M. H., & Utterback, J. M. (1993). The product family and the dynamics of core capability. Sloan Management Review, 34(3), 29-47.
Milgrom, P. R., & Weber, R. J. (1982). A theory of auctions and competitive bidding. Econometrica: Journal of the Econometric Society, 1089-1122.
Moon, S. K., Shu, J., Simpson, T. W., & Kumara, S. R. T. (2010). A module-based service model for mass customization: service family design. IIE Transactions, 43(3), 153-163.
Moses, S., Gruenwald, L., & Dadachanji, K. (2008). A scalable data structure for real-time estimation of resource availability in build-to-order environments. Journal of Intelligent Manufacturing, 19(5), 611-622.
Parkes, D. C., & Kalagnanam, J. (2005). Models for iterative multiattribute procurement auctions. Management Science, 51(3), 435-451.
Parkes, D. (2006). Iterative combinatorial auctions. In P. Cramton, Y. Shoham & R. Steinberg (Eds.), Combinatorial Auctions (pp. 41–77): Cambridge, MA: MIT Press.
Sampson, S. E. (2001). Understanding service businesses: Applying principles of the unified services theory, Second edition. John Wiley & Sons, New York, New York.
Sandholm, T. (2002). Algorithm for optimal winner determination in combinatorial auctions. Artificial Intelligence, 135(1-2), 1-54.
Sandholm, T., Suri, S., Gilpin, A., & Levine, D. (2005). CABOB: a fast optimal algorithm for winner determination in combinatorial auctions. Management Science, 51(3), 374-390.
Simpson, T.W., Maier, J.R.A.,& Mistree, F. (2001). Product platform design: Method and application. Research in Engineering Design, 13(1), 2–22.
Simpson, T. W. (2004). Product platform design and customization: Status and promise. AIEDAM, 18(1), 3–20.
Shaw, M. J. (1988), “Dynamic Scheduling in Cellular Manufacturing Systems: A Framework for Networked Decision Making,” Journal of Manufacturing Systems, Vol. 7, No. 2, pp. 83-94.
Shen, W., Wang, L., & Qi, H. (2006). Agent-based distributed manufacturing process planning and scheduling: a state-of-the-art survey. IEEE Transactions on Systems, Man, and Cybernetics, Part C: Applications and Reviews, 36(4), 563-577.
Tseng, M. M., and Jiao, J. (1996), “Design for Mass Customization,” Annals of the CIRP, Vol. 45, No. 1, pp. 153-156.
Tseng, M. M., & Du, X. (1998). Design by Customers for Mass Customization Products. CIRP Annals - Manufacturing Technology, 47(1), 103-106.
Tseng, M. M., & Jiao, J. (2001). Mass Customization. In G. Salvendy (Ed.), Handbook of industrial engineering: Technology and operations management (pp. 684-708): Wiley-Interscience.
Ulrich, K. (1995). The role of product architecture in the manufacturing firm. Research Policy, 24(3), 419–440.
Vickrey, W. (1961). Counterspeculation, auctions, and competitive sealed tenders. The Journal of finance, 16(1), 8-37.
Voss, C. (1985). Operations Management in Service Industries and the Public Sector: Test and Cases, Wiley, Chichester.
Voss, C. A., & Hsuan, J. (2009). Service Architecture and Modularity. Decision Sciences, 40(3), 541-569.
Wang, C., Ghenniwa, H. H., & Shen, W. (2009). Constraint-based winner determination for auction-based scheduling. IEEE Transactions on Systems, Man and Cybernetics, Part A: Systems and Humans 39(3), 609-618.
Wellman, M. P., Walsh, W. E., Wurman, P. R., & MacKie-Mason, J. K. (2001). Auction protocols for decentralized scheduling. Games and Economic Behavior, 35(1-2), 271-303.
All items in Spectrum are protected by copyright, with all rights reserved. The use of items is governed by Spectrum's terms of access.

Repository Staff Only: item control page

Downloads per month over past year

Research related to the current document (at the CORE website)
- Research related to the current document (at the CORE website)
Back to top Back to top