Order selection optimization in hybrid make-to-order and make-to-stock markets

Abstract

The order selection process for firms operating in markets characterized by standard products as well as strong product customization, is directly tied to the customer and to the associated production costs. This order selection process must be inter-functional with marketing and manufacturing in deciding which orders to accept, specially since the selection criteria used by marketing and manufacturing tend to differ. This paper develops a methodology/mathematical programming model for improving this coordination through an optimal selection of sales orders, such that the total financial contribution of selected orders is maximized. Based on an actual case study in the pigment manufacturing industry, the methodology provides for a user interface that addresses both the manufacturing and marketing department. More importantly, such a marketing/production coordination allows for improved performance in increasingly segmented (customized) markets, while continuing standard product lines as well. © 2001 Operational Research Society Ltd. All Rights Reserved.