Delivery time quotation and order processing with forbidden early shipments

Delivery time quotation and order processing with forbidden early shipments

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Article ID: iaor1994588
Country: United Kingdom
Volume: 20
Issue: 4
Start Page Number: 381
End Page Number: 390
Publication Date: May 1993
Journal: Computers and Operations Research
Authors: , ,
Abstract:

The authors examine the problem of quoting a delivery time to a customer and subsequently processing the customer order, which a manager of a make-to-order firm faces quite often. For reasons of competitiveness, it is desirable to promise a short delivery time. However, because of capacity limitations, such a promise also induces the possibility of tardy deliveries for some items in the order. When acceptable, this is usually expensive; otherwise, to prevent the loss of sales, acquisition of additional processing capacity at a premium becomes necessary. The decision problem is further compounded when early shipments are forbidden, i.e. when the processed items in the order are to be held at their greatest value-added state until the promised delivery time. In this paper, the authors combine the various tradeoffs involved in the problem to first formulate a basic aggregate cost model. They derive the properties essential for the solution of this model, establish its complexity, and present effective solution procedures (both exact and approximate). Finally, the authors discuss many practical extensions of the basic model, and indicate how these might be solved.

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