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Bid-price based order acceptance for make-to-order production
Publikationstyp
Conference Presentation
Publikationsdatum
2021-07-14
Sprache
English
Author
Lohnert, Nina
Citation
31st European Conference on Operational Research (EURO 2021)
Contribution to Conference
Many companies apply the make-to-order (MTO) principle where production only starts after an order has been accepted in order to fulfill individual customer requests. Due to capacity restrictions, however, not every order can be fulfilled and hence, decisions regarding order acceptance have to be made. The objectives to be pursued by a manufacturing company are usually two-fold: On the one hand, companies will strive for (short-term) profit maximization. On the other hand, the goal of providing good service in particular to valuable, returning customers is crucial with respect to long-term business success. These objectives are usually in conflict since valuable customers often get price discounts to tie them more closely to the company. In this talk, a bid price based revenue management strategy for order acceptance and the subsequent scheduling is presented. Two mixed-integer linear programming models are combined in order to determine the orders which are to be accepted and the optimal production schedule. Furthermore, the service aspect is taken into account by defining different aspired service levels for different customer groups. Various settings of customer group specific model parameters are tested on realistic data sets and their results are compared to the performance of the well-known first-come-first-served policy. It can be shown that the approach is successful and works particularly well when the parameter choice is linked to the aspired service levels.
DDC Class
330: Wirtschaft