Customer segmentation, allocation planning and order promising in make-to-stock production

Modern advanced planning systems offer the technical prerequisites for an allocation of available–to–promise (ATP) quantities, i.e. not yet reserved stock and planned production quantities, to different customer segments and for a real time promising of incoming customer orders (ATP consumption) respecting allocated quota. The basic idea of ATP allocation is to increase revenues by means of customer segmentation, as it has successfully been practiced in the airline industry. However, as far as manufacturing industries and make–to–stock production are concerned, it is unclear, whether, when, why and how much benefits actually arise. Using practical data of the lighting industry as an example, this paper reveals such potential benefits. Furthermore, it shows how the current practice of rule–based allocation and consumption can be improved by means of up–to–date demand information and changed customer segmentation. Deterministic linear programming models for ATP allocation and ATP consumption are proposed. Their application is tested in simulation runs using the lighting data. The results are compared with conventional real time order promising with(out) customer segmentation and with batch assignment of customer orders. This research shows that (also in make–to–stock manufacturing industries) customer segmentation can indeed improve profits substantially if customer heterogeneity is high enough and reliable information about ATP supply and customer demand is available. Surprisingly, the choice of an appropriate number of priority classes appears more important than the selection of the ATP consumption policy or the clustering method to be applied.