Integrated order selection and production scheduling under MTO strategy

We consider an integrated order selection and production scheduling problem where a make-to-order (MTO) manufacturer has to select a subset of the orders to process so as to maximise the total profit, and sequence-dependent setup times and costs are incurred between the manufacturing of different classes of products. The problem is formulated as the resource-constrained profitable tour problem (RCPTP) where many variants of the traveling salesman problem (TSP) are its special cases. We model the problem as an integer program and develop an efficient algorithm to solve the problem. Computational results show the efficiency as well as effectiveness of the algorithm. The benefit of the integration is shown and managerial insights are discussed with the computational experiments as well.