Booking Limit Based Revenue Management Approaches for Customer-Value Oriented Make-to-Order Production

Abstract

In make-to-order (MTO) production, decisions are to be made about the jobs which are to be accepted and the sequence in which they are to be carried out. While in practice often rather simple rules like first-come-first-served (FCFS) are used, also strategies from the field of revenue management can be applied to achieve better results. In MTO not only the maximization of short-term profit should be focused on, but also the long-term perspective of performing good service in particular to valuable and returning customers is important. Therefore, in this work a booking-limit approach is combined with an order acceptance and scheduling model for a single machine environment to derive new strategies which take this aspect into account by defining different service levels to be strived at for the different customer segments. These strategies are tested on data settings with three customer segments. It turns out that a newly developed reversed nested booking limit approach (RNBL) leads to the best results regarding the conflicting aims of short-term profit maximization and customer satisfaction, whereas the classical partitioned booking limit (PBL) strategy is not recommendable.