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Optimal Lead Time Policies

Author

Listed:
  • Mark L. Spearman

    (School of Industrial and Systems Engineering, Georgia Institute of Technology, Atlanta, Georgia 30332)

  • Rachel Q. Zhang

    (Department of Industrial and Operations Engineering, University of Michigan, Ann Arbor, Michigan 48109)

Abstract

This paper examines two due-date setting problems first studied by Wein (1991). The first problem seeks to minimize the average due-date lead time (due-date minus arrival date) of jobs subject to a constraint on the fraction of tardy jobs (Problem I) while the second uses the same objective subject to a constraint on average job tardiness (Problem II). We show that under very general conditions, Problem I leads to unethical practice (i.e., quote lead times for which there is no hope to achieve when the system is highly congested) while Problem II results in policies that quote lead times that are monotonically increasing with the congestion level. Furthermore, we prove that Problem II is equivalent to a policy that is widely used and is easy to compute. This policy quotes lead times that guarantee the same serviceability level (the fraction of tardy jobs) to all jobs.

Suggested Citation

  • Mark L. Spearman & Rachel Q. Zhang, 1999. "Optimal Lead Time Policies," Management Science, INFORMS, vol. 45(2), pages 290-295, February.
    • Handle: RePEc:inm:ormnsc:v:45:y:1999:i:2:p:290-295
    DOI: 10.1287/mnsc.45.2.290
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. 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.
    2. Dimitris Bertsimas & Ioannis Ch. Paschalidis, 2001. "Probabilistic Service Level Guarantees in Make-to-Stock Manufacturing Systems," Operations Research, INFORMS, vol. 49(1), pages 119-133, February.
    3. 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.
    4. Altendorfer, Klaus & Minner, Stefan, 2015. "Influence of order acceptance policies on optimal capacity investment with stochastic customer required lead times," European Journal of Operational Research, Elsevier, vol. 243(2), pages 555-565.
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    6. 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.
    7. Sridharan, V. & Li, Xiaoming, 2008. "Improving delivery reliability by a new due-date setting rule," European Journal of Operational Research, Elsevier, vol. 186(3), pages 1201-1211, May.
    8. Weng, Wei & Fujimura, Shigeru, 2012. "Control methods for dynamic time-based manufacturing under customized product lead times," European Journal of Operational Research, Elsevier, vol. 218(1), pages 86-96.
    9. Stratos Ioannidis & Oualid Jouini & Angelos Economopoulos & Vassilis Kouikoglou, 2013. "Control policies for single-stage production systems with perishable inventory and customer impatience," Annals of Operations Research, Springer, vol. 209(1), pages 115-138, October.
    10. 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.
    11. Barış Ata, 2006. "Dynamic Control of a Multiclass Queue with Thin Arrival Streams," Operations Research, INFORMS, vol. 54(5), pages 876-892, October.
    12. 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.
    13. 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.
    14. Barış Ata & Tava Lennon Olsen, 2009. "Near-Optimal Dynamic Lead-Time Quotation and Scheduling Under Convex-Concave Customer Delay Costs," Operations Research, INFORMS, vol. 57(3), pages 753-768, June.
    15. Philipp Afèche & Opher Baron & Yoav Kerner, 2013. "Pricing Time-Sensitive Services Based on Realized Performance," Manufacturing & Service Operations Management, INFORMS, vol. 15(3), pages 492-506, July.
    16. Pengfei Guo & Paul Zipkin, 2007. "Analysis and Comparison of Queues with Different Levels of Delay Information," Management Science, INFORMS, vol. 53(6), pages 962-970, June.
    17. Singer, Marcos & Donoso, Patricio, 2006. "Strategic decision-making at a steel manufacturer assisted by linear programming," Journal of Business Research, Elsevier, vol. 59(3), pages 387-390, March.
    18. Zhi-Long Chen & Nicholas G. Hall, 2008. "Maximum Profit Scheduling," Manufacturing & Service Operations Management, INFORMS, vol. 10(1), pages 84-107, February.
    19. Maglaras, Constantinos & Van Mieghem, Jan A., 2005. "Queueing systems with leadtime constraints: A fluid-model approach for admission and sequencing control," European Journal of Operational Research, Elsevier, vol. 167(1), pages 179-207, November.
    20. 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.
    21. 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.
    22. Mor Armony & Nahum Shimkin & Ward Whitt, 2009. "The Impact of Delay Announcements in Many-Server Queues with Abandonment," Operations Research, INFORMS, vol. 57(1), pages 66-81, February.
    23. Julia Pahl & Stefan Voß & David Woodruff, 2007. "Production planning with load dependent lead times: an update of research," Annals of Operations Research, Springer, vol. 153(1), pages 297-345, September.

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