A tabu search algorithm for order acceptance and scheduling

We consider a make‐to‐order production system, where limited production capacity and order delivery requirements necessitate selective acceptance of the orders. Since tardiness penalties cause loss of revenue, scheduling and order acceptance decisions must be taken jointly to maximize total revenue. We present a tabu search algorithm that solves the order acceptance and scheduling problem on a single machine with release dates and sequence dependent setup times. We analyze the performance of the tabu search algorithm on an extensive set of test instances with up to 100 orders and compare it with two heuristics from the literature. In the comparison, we report optimality gaps which are calculated with respect to bounds generated from a mixed integer programming formulation. The results show that the tabu search algorithm gives near optimal solutions that are significantly better compared to the solutions given by the two heuristics. Furthermore, the run time of the tabu search algorithm is very small, even for 100 orders. The success of the proposed heuristic largely depends on its capability to incorporate in its search acceptance and scheduling decisions simultaneously.