Effectiveness of capacity rationing heuristics in make to order environment

This paper investigates the effectiveness of a dynamic capacity-rationing heuristic for order acceptance and rejection in a capacitated make-to-order manufacturing environment. The heuristics developed for managing capacity has been shown to work better than accepting orders on a first-come, first-served basis. However, realised effectiveness versus potential effectiveness with respect to optimum has not been investigated. Results of this study reveal that the rationing heuristic is very effective in yielding results in proximity of optimum solution when customer segments are very distinct or highly differentiated and when implied utilisation is very high. On the other hand, when the attractiveness of higher profitable customer segment diminishes and capacity is not tight there is a significant potential to improve the heuristic.