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

Hendrik Guhlich, Moritz Fleischmann, Lars Mönch and Raik Stolletz

European Journal of Operational Research, 2018, vol. 268, issue 1, 243-254

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.

Keywords: Revenue management; Order acceptance; Stochastic demand; Stochastic production; Clearing functions (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:268:y:2018:i:1:p:243-254

DOI: 10.1016/j.ejor.2018.01.006

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