Meeting due dates by reserving partial capacity in MTO firms

In many make-to-order production systems customers ask due date confirmed and met. Unexpected urgent orders from valuable customers usually require short lead times, which may cause existing orders in the production schedule to be delayed so that their confirmed due dates cannot be met. This imposes significant uncertainty on the production and delivery schedule in a supply chain. In this paper, we propose a new concept of capacity management, called the reserved capacity scheme, as a viable tool for accommodating urgent orders while meeting the confirmed due dates of all the scheduled orders. Simulation results show that the reserved capacity scheme appears to outperform simple FCFS policy in terms of the total profit attained.