Component rationing for available-to-promise scheduling in configure-to-order systems

Abstract

We address the problem of rationing common components among multiple products in a configure-to-order system with order configuration uncertainty. The objective of this problem is to maximize expected revenue by implementing a threshold rationing policy. Under this policy, a product is available to promise if fulfilling the order for the product will not cause the inventory of any one of its required components to fall below the component's threshold level for that product. The problem is modeled as a two-stage stochastic integer program and solved using the sample average approximation approach. A heuristic is developed to generate good feasible solutions and lower bound estimates. Using industry data, we examine the benefit of component rationing as compared to a First-Come-First-Served policy and show that this benefit is correlated to the average revenue per product and the variability in the revenue across products whose components are constrained. © 2010 Elsevier B.V. All rights reserved.