A new production approach for compensating forecast error and customer loss in waiting

Abstract

It is noticeable that forecast information is always subject to some deviations, but it helps reduce the product time-to-market. This is important as customer loyalty decreases as the waiting time becomes longer; thus, to have a balance between forecast error and customer loss becomes essential. This paper presents a production approach that aims at compensating the forecast error and the possible customer loss in waiting for either a product (or a service) to boost the profit. A novel model to tackle this scenario is presented. The results showed that it could offer a better production solution than the Make-To-Stock or the Make-To-Order approaches by starting the production sometime in between these two traditional approaches.

Keywords:

• production model
• forecast variation
• customer behaviour