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

Roman Kapuscinski () and Sridhar Tayur ()
Additional contact information
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

Operations Research, 2007, vol. 55, issue 1, 56-74

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.

Keywords: production policies; operating characteristics; approximation; heuristic; stochastic models; dynamic programming (search for similar items in EconPapers)
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://dx.doi.org/10.1287/opre.1060.0339 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:oropre:v:55:y:2007:i:1:p:56-74

Access Statistics for this article

More articles in Operations Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().