A cost model for justifying the acceptance of rush orders

Abstract

Rush orders are immediate customer demands which exceed the expectation of the currently effective MPS (master production schedule). Even though such orders are quite common to companies in a dynamic market, most existing studies published in the relevant literature seldom discuss the economical justification of accepting such an order. This paper proposes a mixed integer programming model for computing the cost of accepting the production of a rush order. The computed cost value could serve as a valuable reference for justifying the economics of accepting a rush order, and help determine its pricing strategy.