Resource allocation under flexible demand and supply for services organizations

Abstract

Senior executives of multi-national services organizations face the biggest challenge of optimally and effectively managing its resources (people and infrastructure) across the borders. Allocating the resources to various client projects (or processes) by optimally utilizing them lead to increased return on investment (RoI) for the corporation. In this research, we propose a non-linear integer optimization model for allocating the demand (client projects) to the supply (resources) with certain variability in the demand and supply. The model allocates the demand to the available capacity (of supply) by maximizing the RoI of various stakeholders - (i) clients: who bid for resources by specifying per unit price, also have valuation for the resources based on the number of units allocated, and maximizes the marginal gain for their service contracts, and (ii) service provider: who estimates the capacity and allocate to the demand by maximizing the revenue and minimizing the cost associated for managing the capacity. For a special case in which, (i) the bidders' (clients') per unit prices' are based on their private valuations, (ii) the winning bidders pay their own bid price, (iii) the valuation functions are convex, and (iv) the slack penalty functions are linear, we prove that the greedy allocation is optimal. Also, we analyse the sensitivity of the cost parameter associated with the service provider on a business use-case.