An advanced order acceptance model for hybrid production strategy

Abstract

Competitors stand out through commitment to providing excellent customer service. Many organizations strive to promote their order promising system to generate more reliable quotes with quantity and due date constraints. This paper develops a Capable-to-Promise (CTP) based Order Acceptance Model (OAM) for a Hybrid Production Strategy (HPS) based on the positioning of the Customer Order Decoupling Points. The proposed model allocates the uncommitted availability and planned production receipts to current and anticipation of future needs. A Mixed-Integer Linear Programming (MILP) is developed to determine the optimal order quantities based on the resource availability. The proposed model efficiently mitigates the risk of not being reliable in the commitments due to discrepancies between the real and unused quantities. The CTP based OAM is compatible with a HPS with both make-to-order (MTO) and make-to-stock (MTS). The presented model encompasses four steps. First, demands for MTO products are collected in batches on daily basis and a forecasting model is applied to predict orders for MTS products. Secondly, the quantity-based Revenue Management approach is used to prioritize orders. Afterwards, the optimization model assesses the availability of resources in order to produce collected orders. The final step is to accept valuable orders based on the resource availability. In order to illustrate the applications of the modeling approach, two case studies are provided.