Capacity Allocation and Yield Management in Nonprofit Firms
Associate Professor of Operations Francis
de Vericourt’s research aims to increase our understanding of the
determination of service capacity and its allocation at the firm level. This
work builds upon Weisbrod’s two-goods model of some nonprofit firms,
whereby firms provide two kinds of goods--“mission”
goods (M) and “revenue” goods (R). Given this model,
this research focuses on determination of service capacity and
its allocation where the firm, instead of maximizing profit or
minimizing cost, seeks to maximize a “mission” objective
subject to a constraint that the firm remain viable and solvent.
Some interesting issues are as follows:
- Given random demands and an infinite horizon, what is the form of the best allocation of service capacity in terms of social impacts? Does this optimal allocation policy have a simple structure that can be easily applied in practice? Are there other sub-optimal, but simpler allocation policies?
- What are the implications of having dedicated but separate reserved capacity vis-à-vis having just one type of capacity which is allocated between M-goods and R-goods?
- How can a service allocation policy be combined with pricing decisions for paying customers so that they work together to meet the nonprofit’s objectives? Can we extend the model to several classes of paying customers? If it is possible, what is the best way to allocate capacity between the various classes of customers?
- Which would have a higher social impact-- more M-goods over shorter periods or fewer M-goods over longer periods? The second situation maintains the nonprofit culture within the organization over time. But is it at the cost of operational efficiency?
To address these questions, the researchers will formulate a mathematical optimization problem. Under certain assumptions about demand, costs, and the dynamics of the system, they seek to characterize the best service capacity allocation policy for optimizing the "mission" objective.
"Resource and Revenue Management in Nonprofit Operations," Francis deVericourt and Miguel Lobo, is currently under review by a leading operations journal.