Decision making for capacity planning in a make-to-order company using mixed integer programming

Abstract

The objective of this study is to propose a mixed integer model which can help Company T, a Make-to-Order (MTO) Company to make proper decision in accepting or rejecting the customers’ orders. The proposed model can solve small capacity planning problem with the objective function of maximizing the profit with the condition that the orders must be delivered on time. If the company accepts the orders, three decisions can be made within the planning horizon, which are to do the job by normal time, overtime or to outsource it. A small case study was conducted at Company T and the proposed model was solved by using ILOG Optimization Programming Language (OPL). The reasonableness of the optimum solution shows the model is applicable to Company T. Besides that, sensitivity analysis of the model was done as well by using trial and error method.