Revenue management in make-to-order manufacturing—an application to the iron and steel industry

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

“…Finally, for RM to be effective, it must be supported throughout the corporate culture and management of the company. At ThyssenKrupp VDM the introduction of RM was initiated and is supported by the company's top management, motivated by inefficient order acceptance decisions during times of excess demand and promising results of RM in similar settings (Spengler, Rehkopf, and Volling 2007). Nevertheless, there are several characteristics distinguishing RM at a steel manufacturing facility from its counterparts in service industries.…”

“…Models of capacity control in m-t-o environments, specifically, are later presented by Barut and Sridharan (2005), Defregger and Kuhn (2007), Gallien, Le Tallec, and Schoenmeyr (2004), Gupta and Wang (2004) and Jalora (2006), all considering the sequential order acceptance for multiple offered products with exogenous delivery dates with respect to expected demand. Spengler, Rehkopf, and Volling (2007) extend the above list by additionally providing a detailed description of an observed production structure.…”

“…To quantify the potential of RM, the ex-post optimum was computed. Therefore, all generated requests of an instance were given to a solver calculating the ex-post optimum by solving a relaxed knapsack problem as described in Spengler, Rehkopf, and Volling (2007). According to the sales department, in times of full use of capacity, the incoming demand exceeds the capacity by about 5% to 20% depending on the specific period.…”

Using Dynamic Programming Decomposition for Revenue Management with Opaque Products

“…Petrick, Gönsch, Steinhardt, and Klein (2010) developed several dynamic control mechanisms that allow for flexible products' practical integration into existing capacity control systems. The idea of revenue management with flexible products has been adapted to several fields of application (e.g., Bartodziej and Derigs 2004;Bartodziej, Derigs, and Zils 2007;Spengler, Rehkopf, and Volling 2007;Müller-Bungart 2007;Kimms and Müller-Bungart 2007). Regarding the optimization technique used in this paper, the literature on dynamic programming decomposition approaches for revenue management is of particular interest.…”

Revenue Management in an Assemble-to-Order Production System

“…Traditional revenue management approaches focus on the decision of which orders to accept (see, e.g., Talluri and van Ryzin (1999), Spengler et al (2007)). However, in practice, the company typically must decide on the delivery time for each customer as well.…”