Dynamic Control of a Make-to-Order, Parallel-Server System with Cancellations

Authors:
Melanie Rubino;Barış Ata
Affiliations:
Wolverine Trading LLC, Chicago, Illinois 60604;Kellogg School of Management, Northwestern University, Evanston, Illinois 60208
Venue:
Operations Research
Year:
2009

Citing 8
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Abstract

Motivated by make-to-order production systems, we consider a dynamic control problem for a multiclass, parallel-server queueing system. The production system serves multiple classes of customers who require rigid due-date lead times and may cancel their order subject to a cancellation penalty. To meet the due-date constraints, a system manager may outsource orders when the backlog of work is judged excessive, thereby incurring outsourcing costs. The system manager strives to minimize long-run average costs by dynamically making outsourcing and resource allocation decisions. Under heavy-traffic conditions, the scheduling problem is approximated by a Brownian control problem. Interpreting the solution of the Brownian control problem in the context of the original queueing system, a nongreedy outsourcing and resource allocation policy is proposed. A simulation experiment is performed to demonstrate the effectiveness of this policy.