We study the operational problem of a make-to-order contract manufacturer seeking to integrate produc-
tion scheduling and transportation planning for improved performance under commit-to-delivery model.
The manufacturer produces customer orders on a set of unrelated parallel lines/processors, accounting for
release dates and sequence dependent setup times. A set of shipping options with different costs and tran-
sit times is available for order delivery through the third party logistics service providers. The objective is
to manufacture and deliver multiple customer orders by selecting from the available shipping options, be-
fore preset due dates to minimize total cost of fulfilling orders, including tardiness penalties. We model the
problem as a mixed integer programming model and provide a novel decomposition scheme to solve the
problem. An exact dynamic programming model and a heuristics approach are presented to solve the sub-
problems. The performance of the solution algorithm is tested through a set of experimental studies and
results are presented. The algorithm is shown to efficiently solve the test cases, even the complex instances,
to near optimality.