Revenue optimization for a make-to-order queue in an uncertain market environment

Revenue optimization for a make-to-order queue in an uncertain market environment

0.00 Avg rating0 Votes
Article ID: iaor200973327
Volume: 57
Issue: 6
Start Page Number: 1438
End Page Number: 1450
Publication Date: Nov 2009
Journal: Operations Research
Authors: ,
Keywords: make-to-order
Abstract:

We consider a revenue-maximizing make-to-order manufacturer that serves a market of price- and delay-sensitive customers and operates in an environment in which the market size varies stochastically over time. A key feature of our analysis is that no model is assumed for the evolution of the market size. We analyze two main settings: (i) the size of the market is observable at any point in time; and (ii) the size of the market is not observable and hence cannot be used for decision making. We focus on high-volume systems that are characterized by large processing capacities and market sizes, and where the latter fluctuate on a slower timescale than that of the underlying production system dynamics. We develop an approach to tackle such problems that is based on an asymptotic analysis and that yields near-optimal policy recommendations for the original system via the solution of a stochastic fluid model.

Reviews

Required fields are marked *. Your email address will not be published.