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The capacity investment decision for make-to-order production systems with demand rate control

Author

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  • Bertrand, J. Will M.
  • van Ooijen, Henny P.G.

Abstract

In this paper we study the capacity investment decision for make-to-order manufacturing firms that utilize a fixed capacity, operate in a stochastic, stationary market, and can influence their demand rate by increasing or decreasing their sales effort. We consider manufacturing situations that differ in sales contribution, in market elasticity to sales effort, work-in-process costs, and demand sensitivity to lead time.

Suggested Citation

  • Bertrand, J. Will M. & van Ooijen, Henny P.G., 2012. "The capacity investment decision for make-to-order production systems with demand rate control," International Journal of Production Economics, Elsevier, vol. 137(2), pages 272-283.
  • Handle: RePEc:eee:proeco:v:137:y:2012:i:2:p:272-283
    DOI: 10.1016/j.ijpe.2012.02.010
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    References listed on IDEAS

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    1. 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.
    2. Tijms, H. C. & Duyn Schouten, F. A. van der, 1978. "Inventory control with two switch-over levels for a class of M/G/1 queueing systems with variable arrival and service rate," Stochastic Processes and their Applications, Elsevier, vol. 6(2), pages 213-222, January.
    3. Sanjeev Dewan & Haim Mendelson, 1990. "User Delay Costs and Internal Pricing for a Service Facility," Management Science, INFORMS, vol. 36(12), pages 1502-1517, December.
    4. Frederick S. Hillier, 1963. "Economic Models for Industrial Waiting Line Problems," Management Science, INFORMS, vol. 10(1), pages 119-130, October.
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