Revenue Management in an Assemble-to-Order Production System


Guhlich, Hendrik ; Fleischmann, Moritz ; Stolletz, Raik


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URL: https://ub-madoc.bib.uni-mannheim.de/35856
Additional URL: http://dx.doi.org/10.2139/ssrn.2378950
URN: urn:nbn:de:bsz:180-madoc-358568
Document Type: Working paper
Year of publication: 2014
Place of publication: Rochester, NY
Publication language: English
Institution: Business School > ABWL u. Produktion (Stolletz)
Subject: 650 Management
Keywords (English): Revenue management , Demand fulfillment , Assemble-to-order , Assembly capacity , Scarce input materials
Abstract: In this paper, we consider demand management decisions for an assemble-to-order production system in which both the availability of intermediate material and assembly capacity are limited. For each incoming order, the manufacturer must decide whether to accept it and what due date to quote for an accepted order. The actual assembly dates are still subject to change after these decisions, and a production schedule must be maintained to guarantee that the quoted due dates are met. Therefore, the decisions on accepting orders and quoting due dates must be made with incomplete knowledge of the actual resources used to fulfill the orders. To address these factors, we model this situation and develop a novel revenue management approach using bid prices. An extensive numerical study demonstrates the good performance of the proposed approach in comparison with benchmark algorithms and an ex-post optimal solution applied over a wide range of different supply and demand scenarios. Our results suggest that the consideration of assembly capacity constraints is more vital than the consideration of intermediate material constraints in our test cases.

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