IDEAS home Printed from https://ideas.repec.org/a/inm/oropre/v55y2007i1p56-74.html
   My bibliography  Save this article

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

Author

Listed:
  • 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
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/opre.1060.0339
    Download Restriction: no
    File URL: https://libkey.io/10.1287/opre.1060.0339?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Lawrence M. Wein & Philippe B. Chevalier, 1992. "A Broader View of the Job-Shop Scheduling Problem," Management Science, INFORMS, vol. 38(7), pages 1018-1033, July.
    2. Izak Duenyas & Wallace J. Hopp, 1995. "Quoting Customer Lead Times," Management Science, INFORMS, vol. 41(1), pages 43-57, January.
    3. James K. Weeks, 1979. "A Simulation Study of Predictable Due-Dates," Management Science, INFORMS, vol. 25(4), pages 363-373, April.
    4. J. W. M. Bertrand, 1983. "The Effect of Workload Dependent Due-Dates on Job Shop Performance," Management Science, INFORMS, vol. 29(7), pages 799-816, July.
    5. Manfred Schäl, 1993. "Average Optimality in Dynamic Programming with General State Space," Mathematics of Operations Research, INFORMS, vol. 18(1), pages 163-172, February.
    6. Cheng, T. C. E. & Gupta, M. C., 1989. "Survey of scheduling research involving due date determination decisions," European Journal of Operational Research, Elsevier, vol. 38(2), pages 156-166, January.
    7. Izak Duenyas, 1995. "Single Facility Due Date Setting with Multiple Customer Classes," Management Science, INFORMS, vol. 41(4), pages 608-619, April.
    8. Lode Li, 1992. "The Role of Inventory in Delivery-Time Competition," Management Science, INFORMS, vol. 38(2), pages 182-197, February.
    9. Kenneth R. Baker, 1984. "Sequencing Rules and Due-Date Assignments in a Job Shop," Management Science, INFORMS, vol. 30(9), pages 1093-1104, September.
    10. Suresh Chand & Dilip Chhajed, 1992. "A Single Machine Model for Determination of Optimal Due Dates and Sequence," Operations Research, INFORMS, vol. 40(3), pages 596-602, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erica L. Plambeck, 2004. "Optimal Leadtime Differentiation via Diffusion Approximations," Operations Research, INFORMS, vol. 52(2), pages 213-228, April.
    2. Pinar Keskinocak & R. Ravi & Sridhar Tayur, 2001. "Scheduling and Reliable Lead-Time Quotation for Orders with Availability Intervals and Lead-Time Sensitive Revenues," Management Science, INFORMS, vol. 47(2), pages 264-279, February.
    3. Mark L. Spearman & Rachel Q. Zhang, 1999. "Optimal Lead Time Policies," Management Science, INFORMS, vol. 45(2), pages 290-295, February.
    4. Enns, S. T., 1998. "Lead time selection and the behaviour of work flow in job shops," European Journal of Operational Research, Elsevier, vol. 109(1), pages 122-136, August.
    5. Slotnick, Susan A. & Sobel, Matthew J., 2005. "Manufacturing lead-time rules: Customer retention versus tardiness costs," European Journal of Operational Research, Elsevier, vol. 163(3), pages 825-856, June.
    6. Bertrand, J. W. M. & van Ooijen, H. P. G., 2000. "Customer order lead times for production based on lead time and tardiness costs," International Journal of Production Economics, Elsevier, vol. 64(1-3), pages 257-265, March.
    7. ElHafsi, Mohsen, 2000. "An operational decision model for lead-time and price quotation in congested manufacturing systems," European Journal of Operational Research, Elsevier, vol. 126(2), pages 355-370, October.
    8. Nekoiemehr, Nooshin & Zhang, Guoqing & Selvarajah, Esaignani, 2019. "Due date quotation in a dual-channel supply chain," International Journal of Production Economics, Elsevier, vol. 215(C), pages 102-111.
    9. Philip Kaminsky & Onur Kaya, 2008. "Scheduling and due‐date quotation in a make‐to‐order supply chain," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(5), pages 444-458, August.
    10. Tanja Mlinar & Philippe Chevalier, 2016. "Pooling heterogeneous products for manufacturing environments," 4OR, Springer, vol. 14(2), pages 173-200, June.
    11. 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.
    12. Easton, Fred F. & Moodie, Douglas R., 1999. "Pricing and lead time decisions for make-to-order firms with contingent orders," European Journal of Operational Research, Elsevier, vol. 116(2), pages 305-318, July.
    13. Jiejian Feng & Liming Liu & Xiaoming Liu, 2011. "TECHNICAL NOTE---An Optimal Policy for Joint Dynamic Price and Lead-Time Quotation," Operations Research, INFORMS, vol. 59(6), pages 1523-1527, December.
    14. A. Baykal Hafızoğlu & Esma S. Gel & Pınar Keskinocak, 2013. "Expected Tardiness Computations in Multiclass Priority M / M / c Queues," INFORMS Journal on Computing, INFORMS, vol. 25(2), pages 364-376, May.
    15. Raaymakers, W. H. M. & Weijters, A. J. M. M., 2003. "Makespan estimation in batch process industries: A comparison between regression analysis and neural networks," European Journal of Operational Research, Elsevier, vol. 145(1), pages 14-30, February.
    16. Slotnick, Susan A., 2011. "Order acceptance and scheduling: A taxonomy and review," European Journal of Operational Research, Elsevier, vol. 212(1), pages 1-11, July.
    17. 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.
    18. Kedar S. Naphade & S. David Wu & Robert H. Storer & Bhavin J. Doshi, 2001. "Melt Scheduling to Trade Off Material Waste and Shipping Performance," Operations Research, INFORMS, vol. 49(5), pages 629-645, October.
    19. Sabuncuoglu, I. & Comlekci, A., 2002. "Operation-based flowtime estimation in a dynamic job shop," Omega, Elsevier, vol. 30(6), pages 423-442, December.
    20. Cemal AKTÜRK & Sevinç GÜLSEÇEN, 2018. "Sipariş Teslim Tarihi Problemi İçin Çok Kriterli ve Çok Yöntemli Karar Destek Sistemi Önerisi," Istanbul Management Journal, Istanbul University Business School, vol. 29(84), pages 65-78, June.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:oropre:v:55:y:2007:i:1:p:56-74. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.