Impact of priority sequencing decisions on on-time probability and expected tardiness of orders in make-to-order production systems with external due-dates

We model the priority sequencing problem in a Make-to-Order (MTO) production system where the customers specify the amount of time they are willing to wait for their orders to be fulfilled as a Markov decision process (MDP). The objective function is the sum of a fixed and a variable cost of tardiness that combines two external customer-related criteria: “on-time probability of orders” and “expected tardiness of orders”. We benchmark several simple rules against the optimal policy and analyze the efficient frontier of on-time probability and expected tardiness. Our numerical results show that it is possible to obtain near optimal performance by employing simple rules. Whenever a fixed cost of tardiness is involved, the optimal priority sequencing policy deviates from the earliest-due-date (EDD) principle, however, an adjusted EDD rule performs well. Furthermore, postponement of priority sequencing decisions until the next completion improves performance.