Delivery guarantees and the interdependence of marketing and operations

Delivery guarantees and the interdependence of marketing and operations

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Article ID: iaor200424
Country: United States
Volume: 11
Issue: 3
Start Page Number: 393
End Page Number: 410
Publication Date: Sep 2002
Journal: Production and Operations Management
Authors: , ,
Keywords: production, marketing
Abstract:

Delivery guarantees are an important element in a customer satisfaction program. When setting delivery guarantees, a firm must consider customer expectations as well as operational constraints. We develop a profit-maximization model in which a firm's sales organization, with incomplete information on operations' status, solicits orders and quotes delivery dates. If obtained, orders are processed in a make-to-order facility, after which revenue is received, minus tardiness penalty if the delivery was later than quoted. We specify conditions or an optimal log-linear decision rule and provide exact expressions for its effect on arrival rate, mean processing time, and mean cycle time.

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