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Comparison of capacity rationing policies for a make-to-order production system with two customer classes

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  • Rajesh Piplani
  • Shudong Liu

Abstract

This paper examines capacity rationing policies in a make-to-order production system with two demand classes differing in profit margin and lead time sensitivity. Motivated by the complexity of the optimal rationing policy, an easy-to-implement state-independent critical (SIC) level policy is proposed. We also investigate the benefit of capacity rationing and effectiveness of the SIC policy. Results show that the optimal policy can significantly increase profit in many cases when compared with no-rationing, and the easy-to-implement SIC policy performs quite well compared with optimal rationing policies. Important managerial insights, including the effect of maximal acceptable lead times on the profit, are also obtained.

Suggested Citation

  • Rajesh Piplani & Shudong Liu, 2014. "Comparison of capacity rationing policies for a make-to-order production system with two customer classes," International Journal of Industrial and Systems Engineering, Inderscience Enterprises Ltd, vol. 16(2), pages 223-237.
    • Handle: RePEc:ids:ijisen:v:16:y:2014:i:2:p:223-237
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    Cited by:

    1. Liu, Shudong & Song, Miao & Tan, Kok Choon & Zhang, Changyong, 2015. "Multi-class dynamic inventory rationing with stochastic demands and backordering," European Journal of Operational Research, Elsevier, vol. 244(1), pages 153-163.
    2. P. Escalona & F. Ordóñez & I. Kauak, 2017. "Critical level rationing in inventory systems with continuously distributed demand," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(1), pages 273-301, January.

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