Production and transportation integration for a make-to-order manufacturing company with a commit-to-delivery business mode

When a make–to–order manufacturing company adopts a commit–to–delivery business mode, it commits a delivery due date for an order and is responsible for the shipping cost. Without loss of generality, we consider that transportation is done by a third–party logistics company, such as FedEx or UPS, which provides multiple shipping modes such as overnight, one–day, two–day delivery, and more. When the transportation time has to be short, clearly, shipping cost is more expensive than it could have been. How should a company schedule production for accepted orders so that the company can leave enough transportation time for orders to take slow shipping modes to reduce the shipping cost? We study this problem of integrating the production and transportation functions for a manufacturing company producing a variety of customized products in a make–to–order environment with a commit–to–delivery mode of business.