Abstract:  For make-to-order (MTO) on-line manufacturers, one of the most popular timebased competitive strategies is to widely advertise a uniform delivery time “guarantee” to all the customers. While providing time guarantee can be an effective marketing approach, it is critical for firms to reduce lead time to keep the promise. Decreasing lot size in batching is one of the most important levers to compress lead time in operations. An online manufacturers’ guaranteed delivery time model with order batching is established. The effects of batch processing setup cost, unit inventory holding cost, and unit compression cost of transportation time are analyzed. Some analytic results are provided, and numerical examples are conducted to provide further insight into the problem. The results indicate that when batch processing setup cost, unit inventory holding cost, or unit compression cost of transportation time increase, the online manufacturer should decrease the lot size and shorten the guaranteed delivery time.

Key words:  online manufacturers, guaranteed delivery time, production lead time, transportation lead time