Dynamic order acceptance and capacity planning on a single bottleneck resource

We present a tactical decision model for order acceptance and capacity planning that maximizes the expected profits from accepted orders, allowing for aggregate regular as well as nonregular capacity. The stream of incoming order arrivals is the main source of uncertainty in dynamic order acceptance...

Full description

Saved in:
Bibliographic Details
Published in:Naval research logistics 2007-12, Vol.54 (8), p.874-889
Main Authors: Herbots, Jade, Herroelen, Willy, Leus, Roel
Format: Article
Language:English
Subjects:
capacity planning
multiproject
order acceptance
stochastic dynamic programming
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We present a tactical decision model for order acceptance and capacity planning that maximizes the expected profits from accepted orders, allowing for aggregate regular as well as nonregular capacity. The stream of incoming order arrivals is the main source of uncertainty in dynamic order acceptance and the company only has forecasts of the main properties of the future incoming projects. Project proposals arrive sequentially with deterministic interarrival times and a decision on order acceptance and capacity planning needs to be made each time a proposal arrives and its project characteristics are revealed. We apply stochastic dynamic programming to determine a profit threshold for the accept/reject decision as well as to deterministically allocate a single bottleneck resource to the accepted projects, both with an eye on maximizing the expected revenues within the problem horizon. We derive a number of managerial insights based on an analysis of the influence of project and environmental characteristics on optimal project selection and aggregate capacity usage. © 2007 Wiley Periodicals, Inc. Naval Research Logistics, 2007
ISSN:0894-069X
1520-6750
DOI:10.1002/nav.20259