Due-Date Management Through Iterative Bidding

This paper proposes an iterative bidding framework for integrated due-date management (DDM) decision making. We focus on a type of make-to-order environment in which a firm needs to quote due dates and prices and to schedule the production of a variety of job orders required by a large group of customers. In most cases, customers prefer shorter due dates. However, given limited production capacity and various cost constraints, the firm has to balance the attractiveness of its due-date quotations and the reliability of delivering accepted job orders. The key issue is how to integrate DDM decisions such that high-quality solutions, which benefit both the firm and the customers, can be obtained. We study the integrated DDM in an economic setting where customers are modeled as self-interested agents and the objective of the firm is to maximize social welfare. We present an iterative bidding framework as a decentralized decision support tool which enables the integration of key DDM decisions. Effective solutions are achieved through the automated negotiation between the firm and its customers. We provide analytical results on the application of the proposed framework to two special cases of the integrated DDM. We also evaluate the performance of the framework on general DDM problems through a computational study.