Performance improvement in delay systems by partially controlling the customer arrival processes

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We will study two delay systems in which options offered or the information provided to the customers can increase system performance at the expense of the loss of some customers. This mechanism is a way to "partially control" the random demand processes in order to balance the demand and supply. The first project involving three problems is on a production/inventory system in which dynamic pricing policies are implemented. The first problem is a single product make-to-stock queue in which the inventory is continuously reviewed and controlled by a base-stock policy. Given a set of prices, we aim to find at which inventory or backordering levels, higher prices should be charged in order to reduce stock out costs. In the second problem, the company is able to list a price menu dependent on the lead time the customer is willing to wait. This suggests lower prices for longer lead times and the analysis requires dynamic prioritization of customers to meet the promised lead times.With such price menus, the company suffers less shortage costs and maximizes the profit. The third problem involves a flexible manufacturing system in which production decisions have to be made. First-come-first-served, preemptive-resume priority and dynamic myopic policies will be compared to the optimal solution under profit maximization criterion.