Integration of Pricing and Production Scheduling Decisions: A Mathematical Model

In today’s competitive manufacturing landscape, achieving operational efficiency and optimizing revenue generation are key objectives for make-to-order manufacturers. This paper presents a novel approach for integrating production scheduling and pricing decisions in a make-to-order manufacturing environment. We propose a comprehensive mathematical model that addresses the complex interplay between production scheduling and pricing strategies. By jointly optimizing these two critical aspects, manufacturers can enhance their competitiveness and profitability. The objective of the scheduling decisions is to minimize the total tardiness penalties of jobs on a non-preemptive parallel machine environment, a widely used measure of customer service. Pricing decisions on the other hand aim at maximizing the total revenue. A mixed integer linear programming model is formulated and an algorithm is developed based on the e-constraint approach to conduct the experimental analysis. The algorithm aims to find the best solutions, from the decision-maker’s perspective, by iteratively adjusting production schedules and pricing decisions.