Negotiation based decision support system for order acceptance

Abstract

Purpose – The purpose of this paper is to develop a mathematical model of a make-to-order manufacturing company simultaneously negotiating multiple contingent orders that possess conflicting issues in order to achieve order acceptance decisions (OADs). Design/methodology/approach – The paper developed a mathematical model by incorporating probabilistic theory and some theories of negotiation in the OAD problem. The model helps to harness the relationship between the manufacturer and customers of contingent orders on conflicting issues. A numerical example is enumerated to illustrate the working mechanism and sensitivity of the model developed. Findings – In the negotiation-based OAD system, if more than one customer is willing to negotiate on the offer of manufacturer, rather than engaging in one-to-one negotiation, the manufacturer has to negotiate with all the customers simultaneously to maximize the expected contribution and acceptance probability from all the orders. Also, the numerical example illustrates that, sometimes, rejecting an order/orders from the order set gives better results in terms of the expected contribution than continuing negotiations on them. Originality/value – Through continuing research efforts in this domain, certain models and strategies have been developed for negotiation on a one-to-one basis (i.e. negotiation by the manufacture with only one customer at a time). One-to-one negotiation will neither help companies to streamline their production systems nor will it maximize the expected contribution. To the best of the author’s knowledge, so far, this is the first instance of research work in the domain of a joint OAD and negotiation framework that attempts to develop a simultaneous negotiation method for arriving at OADs.