Order selection with capacity limits and lead-time flexibility (ID: 2-080)

In this paper, we studied a problem of the order selection and production decisions faced by a manufacturer who has the ability to reject orders and set lead-time or due-date for accepted orders with finite production capacity. The objective of the manufacturer is to maximize the profits by considering the production cost, inventory holding cost and tardiness cost simultaneously under finite capacity and flexible lead-time. A decision models for the above cases is proposed. Through numerical analyses, we present some insights regarding the benefits of lead-time and inventory flexibilities under various environments combined with different level of capacity limits and demand variations. Our results suggest that lead-time flexibility is beneficial both when the manufacturer has and does not have inventory holding flexibility. In every environment, lead-time flexibility is more useful when there is no inventory flexibility. While the benefit in the case where there is no inventory holding flexibility is mainly attributed to the capability to accept more profitable orders under limited capacity, the benefit in the case where there is not inventory flexibility may also be attributed to the tradeoffs between the options to produce orders late or early.