Quoting customer lead times

The authors consider the problem of quoting customer lead times in a manufacturing environment under a variety of modeling assumptions. First, they examine the case where capacity is infinite. For this case, the authors derive a closed-form expression for the optimal lead time quote. Second, they consider the case where capacity is finite and the firm processes jobs in first-come-first-served (FCFS) order. The authors prove the optimality of different forms of control limit policies for the situations where the lead time is dictated by the market and where firms are able to compete on the basis of lead time. Finally, they consider the case where the firm may choose to schedule jobs in other than FCFS order and give conditions under which the optimal due-date-quoting/order-scheduling policy will process jobs in earliest due date order.