SIMULATING AN INTEGRATED REVENUE MANAGEMENT APPROACH IN A PRODUCTION SYSTEM WITH PRODUCT SUBSTITUTION

Most revenue management publications dealing with substitutable products in a manufacturing context have focused on pricing issues. They consider that substitution is a customer's decision which occurs as a response to product price differences. In our study, substitution is considered as the firm's policy. We focus on the extension of the revenue management to practical applications in manufacturing and we are motivated by the Canadian softwood lumber case where product substitution is a common demand fulfillment practice. We aim, first, to propose a generic consumption model integrating both capacity control and product substitution decisions and second, to evaluate, using a rolling horizon simulation, the performance of this integrated model in different settings compared to common demand fulfillment approaches. In addition to practical implications, our study contributes to the existing demand fulfillment literature since we simulate different consumption models integrated with a Sales and Operations Planning model.