Matching Supply and Demand with Lead-Time Dependent Price and with Safety Stocks in a Make-to-Order Production System

We studied the ability to reduce supply–demand mismatch of a periodic Make-to-Order (MTO) production system using safety stocks with marketing managing demand lead-time guarantee and price as levers. The aim is understand interdependencies between guarantee, price, stocks. modeled problem an unconstrained stochastic non-linear programming problem, maximizing expected profit per-unit time obtaining closed-form solution. function guarantee. Based on sensitivity analysis parameters, we found that competitiveness adversely affected by low stock level, MTO rate (i.e., supply capability), product high volume). A shorter requires higher through reduced inventory holding costs. for in lead-time-sensitive market reduces stock. In price-sensitive market, decreased instead price. Demand variation results longer (provided cost low). For premium, increases decrease (safety increases). integrated operation-marketing model captures complex trade-offs not seen hierarchical produce better solutions.