Production Planning with Order Selection Flexibility

Kevin Taaffe
University of Florida, Gainesville, Florida
Department of Industrial and Systems Engineering

Co-Authors: Joseph Geunes and H. Edwin Romeijn

---

Manufacturers regularly face the challenge of determining the best allocation of production resources to customer orders in make-to-order systems. Past research on dynamic requirements planning problems has led to models and solution methods that help production planners to effectively address this challenge. These models typically assume that the orders the production facility must meet are exogenously determined and serve as input parameters to the model. In contrast, we approach the problem by allowing the production planning model to implicitly decide which among all outstanding orders a production facility should satisfy in order to maximize the contribution to profit from production. The order selection models we provide generalize classical lot-sizing problems by integrating order-selection and production-planning decisions. The uncapacitated version we present can also be recast as an equivalent dynamic pricing problem that integrates pricing and production planning decisions. We present two polynomial-time solution approaches for the uncapacitated order selection problem. We also provide a polynomial-time solution approach for the capacitated version of the problem when the production capacity is the same in all periods. For the more general unequal capacity case, we study strong problem formulations and develop heuristic solution techniques. Using a broad set of more than 3,000 randomly generated test problems, these heuristic solution methods provided solutions that were, on average, within 0.67% of the optimal solution value.

---