Negotiating price/delivery date in a stochastic manufacturing environment

Abstract

We study a make-to-order manufacturing system consisting of several processing centers that are subject to failures and repairs. Our objective is to build a model that can be used as a tool for negotiating the delivery date and the price of a certain upcoming order. The model takes into account the congestion level of the shop floor at the time the order is placed. Based on the workload of the processing centers, the model splits the order into lots and assigns them to the processing centers so as to determine the order completion time associated with the minimum operating cost. The efficiency of the solution method for the model allows real-time decision-making while negotiating the price and delivery date of the order to be placed. Since the decisions are made based on a snapshot of the congestion level at the shop floor, using this model will reduce the conflict between the marketing and the production activities in manufacturing organizations.