Revenue Management in Make-To-Order Manufacturing: Case Study of Capacity Control at ThyssenKrupp VDM

Abstract

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Revenue Management in a Multi-Stage Make-to-Order Production System

“…However, the scheduling decisions must be made immediately upon arrival of the order, whereas the online scheduling approach in the present paper can change the release date of an order until its production is actually started. Hintsches et al (2010) consider long planning periods so that a planning period is long enough that an order finishes production within the same planning period in which it was started. Again, there is only one possible production start date per order.…”

“…The main difference from models in the literature on MTO-RM (Spengler et al, 2007;Hintsches et al, 2010) and FP-RM Petrick et al, 2010Petrick et al, , 2012 is that in the SDP (4), there are two different time levels at which decisions are made. Order acceptance decisions are made immediately after order arrival, while order release decisions are only made at the beginning of each planning period.…”

“…Nevertheless, revenue management ideas have also been applied in make-to-stock (MTS) production systems (Quante et al, 2009;Meyr, 2009), make-to-order (MTO) production systems (e.g., Easton and Moodie, 1999;Barut and Sridharan, 2005;Kuhn and Defregger, 2005;Spengler et al, 2007;Watanapa and Techanitisawad, 2005;Spengler et al, 2008;Modarres and Sharifyazdi, 2009;Hintsches et al, 2010;Li et al, 2012;Volling et al, 2012;Chevalier et al, 2015), and assemble-to-order (ATO) production systems (Harris and Pinder, 1995;Gao et al, 2012;Guhlich et al, 2015).…”

“…These decisions are of crucial importance if orders are heterogeneous, i.e., when they differ in capacity requirements and contribution margins. This is the case, e.g., in the steel industry (Hintsches et al, 2010), where different products are produced to order in a multi-stage no-wait flow shop, and capacity expansion is very costly. Orders differ in their capacity consumption and contribution margins.…”

“…While many revenue management approaches only consider order acceptance decisions (e.g., Talluri and Van Ryzin, 1999;Spengler et al, 2007;Hintsches et al, 2010), there is typically more than one possible release date for an incoming order in the described production environments. Keeping more flexibility in the production schedule allows the company to accept and produce more orders.…”