Optimal control of a high-volume assemble-to-order system with maximum leadtime quotation and expediting

We consider an assemble-to-order system in which components must be expedited, if necessary, to avoid violating quoted maximum leadtimes. When a high volume of customers arrive per time unit, we provide a policy for setting static prices, maximum leadtime quotations, and component production capacity, and then dynamically sequencing orders for assembly and expediting components. When expediting costs are large, we prove our policy asymptotically maximizes infinite horizon expected discounted profit as the arrival rate of prospective customers grows large. For a more general setting with dynamic component salvaging and expediting with arbitrary costs, we show how to solve an approximating Brownian control problem and translate its solution into an effective control policy for the original assemble-to-order system.