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A clearing function based bid-price approach to integrated order acceptance and release decisions

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  • Guhlich, Hendrik
  • Fleischmann, Moritz
  • Mönch, Lars
  • Stolletz, Raik

Abstract

In this paper, we consider the order acceptance and order release decisions of a manufacturer facing order-specific demand. In contrast to previous literature, both demand and production are stochastic. We develop a novel bid-price-based revenue management approach to solve this decision problem. The production system is modeled using clearing functions to capture the non-linear inter-dependency of workload and lead times in stochastic production systems. In extant literature, a common approach to cope with variability in a production system is to introduce fixed, workload-independent lead times. We show in a numerical study that our newly developed approach based on clearing functions clearly outperforms this fixed lead time approach.

Suggested Citation

  • Guhlich, Hendrik & Fleischmann, Moritz & Mönch, Lars & Stolletz, Raik, 2018. "A clearing function based bid-price approach to integrated order acceptance and release decisions," European Journal of Operational Research, Elsevier, vol. 268(1), pages 243-254.
    • Handle: RePEc:eee:ejores:v:268:y:2018:i:1:p:243-254
    DOI: 10.1016/j.ejor.2018.01.006
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    References listed on IDEAS

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