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

27 Pages Posted: 20 Jan 2016

See all articles by Hendrik Guhlich

Hendrik Guhlich

University of Mannheim

Moritz Fleischmann

University of Mannheim, Business School

L. Mönch

FernUniversität in Hagen

Raik Stolletz

University of Mannheim

Date Written: October 14, 2015

Abstract

In the present paper, we consider the demand management decisions of a manufacturer facing stochastic demand. While in the previous literature, either the order release decisions are fixed upon arrival or a single-stage production environment is assumed, we make online order acceptance and order release decisions in a multi-stage production system. After describing the problem formally as a stochastic dynamic program, we develop a bid-pricebased revenue management approach in which the order acceptance and order release decisions are made based on previously computed bid prices and feasibility according to a linear program describing the multi-stage production system. A numerical study shows the good performance of the approach compared to an ex-post optimal solution in various supply and demand settings as well as the benefits relative to existing models, which work under simplifying assumptions.

Keywords: Revenue management, multi-stage production, make-to-order

JEL Classification: M11, C61

Suggested Citation

Guhlich, Hendrik and Fleischmann, Moritz and Mönch, L. and Stolletz, Raik, Revenue Management in a Multi-Stage Make-to-Order Production System (October 14, 2015). Available at SSRN: https://ssrn.com/abstract=2718930 or http://dx.doi.org/10.2139/ssrn.2718930

Hendrik Guhlich (Contact Author)

University of Mannheim ( email )

Universitaetsbibliothek Mannheim
Zeitschriftenabteilung
Mannheim, 68131
Germany

Moritz Fleischmann

University of Mannheim, Business School ( email )

University of Mannheim
P.O. Box 10 34 62
Mannheim, 68131
Germany

L. Mönch

FernUniversität in Hagen

Universitätsstrasse 41
Feithstrathe 140
Hagen, 58084
Germany

Raik Stolletz

University of Mannheim ( email )

Schloss
Mannheim, 68131
Germany

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