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Integrated Production Planning and Pricing Decisions in Congestion-Prone Capacitated Production Systems

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Essays in Production, Project Planning and Scheduling

Part of the book series: International Series in Operations Research & Management Science ((ISOR,volume 200))

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Abstract

In many industries both the pricing of a product and its delivery lead time to the customer are significant factors affecting demand. However, it is well known from queuing models that the lead time increases nonlinearly with the utilization of capacitated resources. Hence when customer demand is sensitive to delivery lead times, firms must take a broader view: A large reduction in price may increase demand to the point that it cannot be met in a timely manner with available capacity, which can adversely affect customer satisfaction and reduce future sales.

In this chapter we develop an integrated model for dynamic pricing and production planning for a single product under workload-dependent lead times. This allows us to capture interactions between pricing, sales and lead times that have generally not been considered in the past. We present numerical examples to demonstrate these interactions, as well as analytical results showing that the proposed model behaves quite differently from conventional models that ignore congestion.

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Authors and Affiliations

  1. Terra Technology, 20 Glover Avenue, 06850, Norwalk, CT, USA

    Abhijit Upasani

  2. Edward P. Fitts Department of Industrial and Systems Engineering, 300 Daniels Hall, Campus Box 7906, North Carolina State University, 27695-7906, Raleigh, NC, USA

    Reha Uzsoy

Authors
  1. Abhijit Upasani
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  2. Reha Uzsoy
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Correspondence to Reha Uzsoy .

Editor information

Editors and Affiliations

  1. College of Engineering, The University of Oklahoma, Norman, Oklahoma, USA

    P. Simin Pulat

  2. Dept of Industrial & Systems Engineering, Virginia Tech, Blacksburg, Virginia, USA

    Subhash C. Sarin

  3. Dept of Industrial & Systems Engineering, North Carolina State University, Raleigh, North Carolina, USA

    Reha Uzsoy

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Upasani, A., Uzsoy, R. (2014). Integrated Production Planning and Pricing Decisions in Congestion-Prone Capacitated Production Systems. In: Pulat, P., Sarin, S., Uzsoy, R. (eds) Essays in Production, Project Planning and Scheduling. International Series in Operations Research & Management Science, vol 200. Springer, Boston, MA. https://doi.org/10.1007/978-1-4614-9056-2_3

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