IDEAS home Printed from https://ideas.repec.org/a/eee/oprepe/v13y2024ics2214716024000228.html
   My bibliography  Save this article

Integrated order acceptance and inventory policy optimization in a multi-period, multi-product hybrid production system

Author

Listed:
  • Ervural, Bilal
  • Özaydın, Ali

Abstract

In today's volatile business environment, manufacturers often face the challenge of making sales and production decisions despite unstable market demand. Companies must strategically determine which customer orders to fulfill or which products to stock under limited resources. This study addresses these challenges by proposing a mixed-integer mathematical programming model to optimize order acceptance/rejection and inventory decisions in a multi-period, multi-product hybrid make-to-order (MTO) and make-to-stock (MTS) system. The model incorporates various factors such as holding costs, production costs, stockout costs, budget constraints, production lead time, labor constraints, and order-specific costs. For each period, the model evaluates resource utilization, production lead times, and stock and stockout costs to decide production for stock or order acceptance/rejection. Additionally, it determines the optimal production quantities for stock and order fulfillment, as well as safety stock levels, all aimed at maximizing profit. To validate the proposed model, a real-life application was conducted using data from a chemical plant, exploring different scenarios to assess the model's sensitivity and capabilities. Furthermore, an experimental study examined the limitations of the mathematical model as the problem size increased, with test problems of varying dimensions developed to measure its effectiveness.

Suggested Citation

  • Ervural, Bilal & Özaydın, Ali, 2024. "Integrated order acceptance and inventory policy optimization in a multi-period, multi-product hybrid production system," Operations Research Perspectives, Elsevier, vol. 13(C).
    • Handle: RePEc:eee:oprepe:v:13:y:2024:i:c:s2214716024000228
    DOI: 10.1016/j.orp.2024.100318
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2214716024000228
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.orp.2024.100318?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. J Ashayeri & W J Selen, 2001. "Order selection optimization in hybrid make-to-order and make-to-stock markets," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 52(10), pages 1098-1106, October.
    2. Boulaksil, Youssef, 2016. "Safety stock placement in supply chains with demand forecast updates," Operations Research Perspectives, Elsevier, vol. 3(C), pages 27-31.
    3. Aouam, Tarik & Brahimi, Nadjib, 2013. "Integrated production planning and order acceptance under uncertainty: A robust optimization approach," European Journal of Operational Research, Elsevier, vol. 228(3), pages 504-515.
    4. Wei Xu & Dong-Ping Song, 2022. "Integrated optimisation for production capacity, raw material ordering and production planning under time and quantity uncertainties based on two case studies," Operational Research, Springer, vol. 22(3), pages 2343-2371, July.
    5. Utama, Dana Marsetiya & Santoso, Imam & Hendrawan, Yusuf & Dania, Wike Agustin Prima, 2022. "Integrated procurement-production inventory model in supply chain: A systematic review," Operations Research Perspectives, Elsevier, vol. 9(C).
    6. Gössinger, Ralf & Kalkowski, Sonja, 2015. "Robust order promising with anticipated customer response," International Journal of Production Economics, Elsevier, vol. 170(PB), pages 529-542.
    7. Taher Ahmadi & Zumbul Atan & Ton de Kok & Ivo Adan, 2019. "Optimal control policies for assemble-to-order systems with commitment lead time," IISE Transactions, Taylor & Francis Journals, vol. 51(12), pages 1365-1382, December.
    8. 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.
    9. Jie Zhang & Wei Qin & Wenhao Wang, 2015. "An Available-to-Promise Model for Periodical Order Promising," Springer Books, in: Zhenji Zhang & Zuojun Max Shen & Juliang Zhang & Runtong Zhang (ed.), Liss 2014, edition 127, pages 167-171, Springer.
    10. So, Kut C. & Song, Jing-Sheng, 1998. "Price, delivery time guarantees and capacity selection," European Journal of Operational Research, Elsevier, vol. 111(1), pages 28-49, November.
    11. Yadavalli, Venkata SS & Darbari, Jyoti Dhingra & Bhayana, Nidhi & Jha, P.C. & Agarwal, Vernika, 2019. "An integrated optimization model for selection of sustainable suppliers based on customers’ expectations," Operations Research Perspectives, Elsevier, vol. 6(C).
    12. Hendry, L. C. & Kingsman, B. G., 1989. "Production planning systems and their applicability to make-to-order companies," European Journal of Operational Research, Elsevier, vol. 40(1), pages 1-15, May.
    13. Ebadian, M. & Rabbani, M. & Jolai, F. & Torabi, S.A. & Tavakkoli-Moghaddam, R., 2008. "A new decision-making structure for the order entry stage in make-to-order environments," International Journal of Production Economics, Elsevier, vol. 111(2), pages 351-367, February.
    14. Taher Ahmadi & Zümbül Atan & Ton de Kok & Ivo Adan, 2019. "Optimal control policies for an inventory system with commitment lead time," Naval Research Logistics (NRL), John Wiley & Sons, vol. 66(3), pages 193-212, April.
    15. Ghadimi, Foad & Aouam, Tarik & Haeussler, Stefan & Uzsoy, Reha, 2022. "Integrated and hierarchical systems for coordinating order acceptance and release planning," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1277-1289.
    16. Yusuf, Y. Y. & Gunasekaran, A. & Adeleye, E. O. & Sivayoganathan, K., 2004. "Agile supply chain capabilities: Determinants of competitive objectives," European Journal of Operational Research, Elsevier, vol. 159(2), pages 379-392, December.
    17. Kay Peeters & Henny van Ooijen, 2020. "Hybrid make-to-stock and make-to-order systems: a taxonomic review," International Journal of Production Research, Taylor & Francis Journals, vol. 58(15), pages 4659-4688, July.
    18. Amirhosein Gholami & Nasim Nezamoddini & Mohammad T. Khasawneh, 2023. "Customized orders management in connected make-to-order supply chains," Operations Management Research, Springer, vol. 16(3), pages 1428-1443, September.
    19. Ben Ali, M. & D’Amours, S. & Gaudreault, J. & Carle, M-A., 2018. "Configuration and evaluation of an integrated demand management process using a space-filling design and Kriging metamodeling," Operations Research Perspectives, Elsevier, vol. 5(C), pages 45-58.
    20. Goh, Shao Hung & Eldridge, Stephen, 2019. "Sales and Operations Planning: The effect of coordination mechanisms on supply chain performance," International Journal of Production Economics, Elsevier, vol. 214(C), pages 80-94.
    Full references (including those not matched with items on IDEAS)

    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. Helia Yousefnejad & Maryam Esmaeili, 2020. "Tactical production planning in a hybrid MTS/MTO system using Stackelberg game," Operational Research, Springer, vol. 20(3), pages 1791-1809, September.
    2. Surbhi Upadhyay & Suresh Kumar Garg & Rishu Sharma, 2023. "Analyzing the Factors for Implementing Make-to-Order Manufacturing System," Sustainability, MDPI, vol. 15(13), pages 1-22, June.
    3. Zhi-Long Chen & Nicholas G. Hall, 2010. "The Coordination of Pricing and Scheduling Decisions," Manufacturing & Service Operations Management, INFORMS, vol. 12(1), pages 77-92, April.
    4. Li, Xueping & Wang, Jiao & Sawhney, Rapinder, 2012. "Reinforcement learning for joint pricing, lead-time and scheduling decisions in make-to-order systems," European Journal of Operational Research, Elsevier, vol. 221(1), pages 99-109.
    5. Stevenson, Mark & Hendry, Linda C., 2006. "Aggregate load-oriented workload control: A review and a re-classification of a key approach," International Journal of Production Economics, Elsevier, vol. 104(2), pages 676-693, December.
    6. Weckenborg, Christian & Schumacher, Patrick & Thies, Christian & Spengler, Thomas S., 2024. "Flexibility in manufacturing system design: A review of recent approaches from Operations Research," European Journal of Operational Research, Elsevier, vol. 315(2), pages 413-441.
    7. Abhijit Upasani & Reha Uzsoy, 2008. "Incorporating manufacturing lead times in joint production-marketing models: A review and some future directions," Annals of Operations Research, Springer, vol. 161(1), pages 171-188, July.
    8. Huang, Yeu-Shiang & Chen, Si-Hen & Ho, Jyh-Wen, 2013. "A study on pricing and delivery strategy for e-retailing systems," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 59(C), pages 71-84.
    9. Pereira, Daniel Filipe & Oliveira, José Fernando & Carravilla, Maria Antónia, 2020. "Tactical sales and operations planning: A holistic framework and a literature review of decision-making models," International Journal of Production Economics, Elsevier, vol. 228(C).
    10. Watanapa, Bunthit & Techanitisawad, Anulark, 2005. "Simultaneous price and due date settings for multiple customer classes," European Journal of Operational Research, Elsevier, vol. 166(2), pages 351-368, October.
    11. Taher Ahmadi & Alireza F. Hesaraki & Anwar Mahmoodi & Ahmadreza Marandi, 2025. "Managing customer waiting times in an inventory system using Conditional Value-at-Risk measure," Annals of Operations Research, Springer, vol. 344(1), pages 1-45, January.
    12. Murat Erkoc & S. David Wu & Haresh Gurnani, 2008. "Delivery‐date and capacity management in a decentralized internal market," Naval Research Logistics (NRL), John Wiley & Sons, vol. 55(5), pages 390-405, August.
    13. Surbhi Upadhyay & Suresh Kumar Garg & Rishu Sharma, 2025. "Unlocking competitive edge and sustainability through Make-to-Order manufacturing: an empirical investigation," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 27(4), pages 8811-8834, April.
    14. Jana Ralfs & Gudrun P. Kiesmüller, 2022. "Inventory management with advance demand information and flexible shipment consolidation," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 44(4), pages 1009-1044, December.
    15. Omar, Yamila M. & Minoufekr, Meysam & Plapper, Peter, 2019. "Business analytics in manufacturing: Current trends, challenges and pathway to market leadership," Operations Research Perspectives, Elsevier, vol. 6(C).
    16. Ebadian, M. & Rabbani, M. & Jolai, F. & Torabi, S.A. & Tavakkoli-Moghaddam, R., 2008. "A new decision-making structure for the order entry stage in make-to-order environments," International Journal of Production Economics, Elsevier, vol. 111(2), pages 351-367, February.
    17. Charnsirisakskul, Kasarin & Griffin, Paul M. & Keskinocak, Pinar, 2006. "Pricing and scheduling decisions with leadtime flexibility," European Journal of Operational Research, Elsevier, vol. 171(1), pages 153-169, May.
    18. Corti, Donatella & Pozzetti, Alessandro & Zorzini, Marta, 2006. "A capacity-driven approach to establish reliable due dates in a MTO environment," International Journal of Production Economics, Elsevier, vol. 104(2), pages 536-554, December.
    19. Cakravastia, Andi & Toha, Isa S. & Nakamura, Nobuto, 2002. "A two-stage model for the design of supply chain networks," International Journal of Production Economics, Elsevier, vol. 80(3), pages 231-248, December.
    20. Sujan Piya & Ahm Shamsuzzoha & Mohammad Khadem & Nasr Al-Hinai, 2020. "Identification of Critical Factors and Their Interrelationships to Design Agile Supply Chain: Special Focus to Oil and Gas Industries," Global Journal of Flexible Systems Management, Springer;Global Institute of Flexible Systems Management, vol. 21(3), pages 263-281, September.

    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:eee:oprepe:v:13:y:2024:i:c:s2214716024000228. 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: Catherine Liu (email available below). General contact details of provider: http://www.journals.elsevier.com/operations-research-perspectives .

    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.