Learning and adaptation of a policy for dynamic order acceptance in make-to-order manufacturing

Order acceptance under uncertainty is a critical decision-making problem at the interface between customer relationship management and production planning of order-driven manufacturing systems. In this work, a novel approach for simulation-based development and on-line adaptation of a policy for dynamic order acceptance under uncertainty in make-to-order manufacturing using average-reward reinforcement learning is proposed. Locally weighted regression is used to generalize the gain value of accepting or rejecting similar orders regarding attributes such as product mix, price, size and due date. The order acceptance policy is learned by classifying an arriving order as belonging either to the acceptance set or to the rejection set. For exploitation, only orders in the acceptance set must be chosen for shop-floor scheduling. For exploration some orders from the rejection set are also considered as candidates for acceptance. Comparisons made with different order acceptance heuristics highlight the effectiveness of the proposed ARLOA algorithm to maximize the average revenue obtained per unit cost of installed capacity whilst quickly responding to unknown variations in order arrival rates and attributes. (C) 2009 Elsevier Ltd. All rights reserved.