Acceptance Ordering Scheduling Problem: The impact of an order-portfolio on a make-to-order firm’s profitability

Abstract

Firms’ growth, the darling measure of investors, comes from higher revenues. Thus, sales and marketing departments make extreme efforts to accept as many customer orders as possible. Unfortunately, not all orders contribute equally to profits, and some orders may even reduce net profits. Thus, saying no (i.e., not accepting an order) may be a necessary condition for net profits growth. For understanding the impact of rejecting orders on profitability, we propose an order acceptance and scheduling problem (OAS). Although the OAS has extensively been studied in the literature, there is still some gap between these papers and real-life problems in industry. In an attempt to close that gap, the OAS we propose considers orders revenues, machines costs, holding costs and tardiness costs. We develop a mixed integer linear programming (MILP) model for solving this problem. Since the complexity of the problem makes it impossible for the MILP to solver large-scale instances, we also propose a metaheuristic algorithm. Numerical experiments show that the metaheuristic finds good quality solutions in short computational times. In the last part of the paper we confirm some managerial insights: higher holding and tardiness costs imply a lower acceptance of orders, forcing production has a concave negative impact on net profits, and accurately estimating costs is essential for good planning.