Dynamic pricing of excess capacity in production networks by fuzzy logic

Abstract

The research concerns a make to order manufacturing environment and two classes of customers who submit orders: core customers (long-term partnership) and short-term customers. The orders submitted by the short-term customers depend on the price and service level proposed by the firm. This research proposes a pricing policy based on a fuzzy tool to set the price for short-term customers in production networks. The fuzzy tool captures the state of the manufacturing system in terms of workload of the manufacturing system, reliability and demand fluctuations. The fuzzy tool developed supports the cooperation mechanism among the enterprises of the production network. A discrete event simulation environment is used to test the proposed approach in a static and dynamic environment. The numerical results are compared to the case without cooperation among the firms within the production network. The simulation results show how the proposed approach outperforms the other policies in all conditions tested. The combination of fuzzy dynamic price and cooperation mechanism improves the performance with low movements of orders among the partners of the network; this means that the transportation costs have a low impact.