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Reliable Due-Date Setting in a Capacitated MTO System with Two Customer Classes

Author

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  • Roman Kapuscinski

    (Ross School of Business, University of Michigan, Ann Arbor, Michigan 48109)

  • Sridhar Tayur

    (Tepper School of Business, Carnegie Mellon University, Pittsburgh, Pennsylvania 15213)

Abstract

We study a finite-horizon discrete-time model of due-date setting (equivalently, reserving capacity) in a make-to-order setting, where demands arrive from two different classes of customers. Demands in each period are stochastic. The two customer classes penalize with different margins the lead times quoted to them, which (once quoted) are to be satisfied reliably. We first derive the optimal policy for reserving capacity that maps to quoted due dates. We use the insights from its structure to develop a novel approximation that provides near-optimal solutions quickly. Currently available heuristics are tested and are found to be considerably less effective than the above approximation.

Suggested Citation

  • Roman Kapuscinski & Sridhar Tayur, 2007. "Reliable Due-Date Setting in a Capacitated MTO System with Two Customer Classes," Operations Research, INFORMS, vol. 55(1), pages 56-74, February.
    • Handle: RePEc:inm:oropre:v:55:y:2007:i:1:p:56-74
    DOI: 10.1287/opre.1060.0339
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    References listed on IDEAS

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    Cited by:

    1. Lin, Cheng-Chang & Wu, Yi-Chen, 2013. "Optimal pricing for build-to-order supply chain design under price-dependent stochastic demand," Transportation Research Part B: Methodological, Elsevier, vol. 56(C), pages 31-49.
    2. Gökçe Kahveciog̃lu & Barış Balcıog̃lu, 2016. "Coping with production time variability via dynamic lead-time quotation," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 38(4), pages 877-898, October.
    3. Lin, Cheng-Chang & Wang, Tsai-Hsin, 2011. "Build-to-order supply chain network design under supply and demand uncertainties," Transportation Research Part B: Methodological, Elsevier, vol. 45(8), pages 1162-1176, September.
    4. Abduh Sayid & Yannick Frein & Ramzi Hammami, 2017. "Optimal firm's policy under lead time-and price-dependent demand: interest of customers rejection policy," Papers 1708.07305, arXiv.org.
    5. A. Baykal Hafızoğlu & Esma S. Gel & Pınar Keskinocak, 2016. "Price and Lead Time Quotation for Contract and Spot Customers," Operations Research, INFORMS, vol. 64(2), pages 406-415, April.
    6. Chevalier, Philippe & Lamas, Alejandro & Lu, Liang & Mlinar, Tanja, 2015. "Revenue management for operations with urgent orders," European Journal of Operational Research, Elsevier, vol. 240(2), pages 476-487.
    7. Mor Armony & Erica Plambeck & Sridhar Seshadri, 2009. "Sensitivity of Optimal Capacity to Customer Impatience in an Unobservable M/M/S Queue (Why You Shouldn't Shout at the DMV)," Manufacturing & Service Operations Management, INFORMS, vol. 11(1), pages 19-32, June.
    8. Abduh Sayid & Yannick Frein & Ramzi Hammami, 2016. "Optimal firm's policy under lead time-and price-dependent demand: interest of customers rejection policy," Post-Print hal-01576828, HAL.
    9. Kaman, Cumhur & Savasaneril, Secil & Serin, Yasemin, 2013. "Production and lead time quotation under imperfect shop floor information," International Journal of Production Economics, Elsevier, vol. 144(2), pages 422-431.
    10. Richard Pibernik & Prashant Yadav, 2008. "Dynamic capacity reservation and due date quoting in a make‐to‐order system," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(7), pages 593-611, October.
    11. Secil Savasaneril & Ece Sayin, 2017. "Dynamic lead time quotation under responsive inventory and multiple customer classes," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 39(1), pages 95-135, January.
    12. Gunasekaran, Angappa & Ngai, Eric W.T., 2009. "Modeling and analysis of build-to-order supply chains," European Journal of Operational Research, Elsevier, vol. 195(2), pages 319-334, June.
    13. Mustafa Akan & Barı ş Ata & Tava Olsen, 2012. "Congestion-Based Lead-Time Quotation for Heterogenous Customers with Convex-Concave Delay Costs: Optimality of a Cost-Balancing Policy Based on Convex Hull Functions," Operations Research, INFORMS, vol. 60(6), pages 1505-1519, December.
    14. Tanja Mlinar & Philippe Chevalier, 2016. "Pooling heterogeneous products for manufacturing environments," 4OR, Springer, vol. 14(2), pages 173-200, June.
    15. Vasiliki Kostami, 2020. "Price and Lead time Disclosure Strategies in Inventory Systems," Production and Operations Management, Production and Operations Management Society, vol. 29(12), pages 2760-2788, December.
    16. Abduh Sayid Albana & Yannick Frein & Ramzi Hammami, 2016. "Study of Client Reject Policies under Lead-Time and Price Dependent Demand," Working Papers hal-01250835, HAL.
    17. Seçil Savaşaneril & Paul M. Griffin & Pınar Keskinocak, 2010. "Dynamic Lead-Time Quotation for an M/M/1 Base-Stock Inventory Queue," Operations Research, INFORMS, vol. 58(2), pages 383-395, April.
    18. Slotnick, Susan A., 2011. "Optimal and heuristic lead-time quotation for an integrated steel mill with a minimum batch size," European Journal of Operational Research, Elsevier, vol. 210(3), pages 527-536, May.

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