Order Pricing and Acceptance Policy in Make-to-Order Firm Based on Revenue Management

A Make-to-Order firm with limited and fixed production ability produces one product to meet demand from contractual and customers.Contractual orders must be accepted,while fillin orders can be accepted or rejected.In this paper,we address the optimal pricing problem of contractual orders and the optimal order acceptance problem of fill-in orders with revenue management.In order to maximize the total expected profit,we use the dynamic programming to model the problems,and gain the optimal pricing and the optimal order acceptance policy.Through the numerical study,we conclude that the total profit based on the optimal order acceptance policy is much higher than that based on FCFS order acceptance policy,and when the potential machine utilization ratio is relatively high,the optimal order acceptance can remarkably increase the profit.Finally we find that the optimal price of contractual order is decreasing with the market price of fill-in order.