Simultaneous and sequential price quotations for uncertain order inquiries with production scheduling cost

This article studies the coordination between pricing and production scheduling decisions of a manufacturer who quotes prices for a set of order inquiries. Each inquiry is either canceled or confirmed by its owner following a certain probability distribution that depends on the quoted price. The man...

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Bibliographic Details
Published in:IIE transactions Vol. 44; no. 10; pp. 820 - 833
Main Authors: Liu, Zhixin, Lu, Liang, Qi, Xiangtong
Format: Journal Article
Language:English
Published: Norcross Taylor & Francis Group 01.10.2012
Taylor & Francis Ltd
Subjects:
coordination
Heuristic
Optimization algorithms
Price quotation
Price quotations
Production scheduling
Quadratic programming
Studies
Uncertainty
ISSN:0740-817X, 2472-5854, 1545-8830, 2472-5862
Online Access:Get full text
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Summary:This article studies the coordination between pricing and production scheduling decisions of a manufacturer who quotes prices for a set of order inquiries. Each inquiry is either canceled or confirmed by its owner following a certain probability distribution that depends on the quoted price. The manufacturer then incurs a production scheduling cost for processing each firm order. Two types of price quotation schemes, simultaneous and sequential quotations, are investigated. A simultaneous quotation quotes all order inquiries simultaneously. The problem is formulated with a specific form of price function as a quadratic program that can be solved efficiently. Properties of optimal quotations are provided. A sequential quotation quotes order inquiries one at a time. For the problem, optimal algorithms are developed using implicit enumeration and design-efficient heuristics. Simultaneous and sequential quotations and several managerial insights are obtained in computational studies. The conditions under which the simultaneous quotation performs close to sequential quotation and conditions under which heuristic sequential quotation performs near optimal are highlighted.
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ISSN:0740-817X
2472-5854
1545-8830
2472-5862
DOI:10.1080/0740817X.2011.649389