The Order Selection Strategy of Polluting OEMs under Environmental Regulations

Abstract

Under environmental regulations, the government restricts the economic activities of polluting OEMs (Original Equipment Manufacturers) in order to improve ecological and economic efficiency. The most direct measure is to limit the production capacity of the companies. Under the condition of limited capacity, the order selection strategy of OEMs will be the direct determinant of the company’s own profits. In the foundry market, there are many low-profit orders, while the number of high-profit orders is limited and uncertain. Companies who choose to wait for high-profit orders must bear the waiting costs and the risk of losing a certain profit. Therefore, it is of great significance for the long-term development of the company to select orders to obtain the best profit under the condition of limited production capacity. This paper takes polluting OEMs as the research object and studies the optimal order selection problems of companies under environmental regulations by establishing order selection decision models for different foundry cycles under the condition of limited production capacity. The study found that in the single foundry cycle, there will be an optimal waiting-time threshold for high-profit orders. Based on this optimal waiting-time threshold, the corresponding order selection strategy can be effectively formulated. However, in the multi-foundation cycle, since the optimal waiting-time threshold of high-profit orders is affected by the long-term average profit, the company’s optimal order selection strategy is based on the long-term average profit maximization.