Premium
A general strategic capacity planning model under demand uncertainty
Author(s) -
Huh Woonghee Tim,
Roundy Robin O.,
Çakanyildirim Metin
Publication year - 2006
Publication title -
naval research logistics (nrl)
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.665
H-Index - 68
eISSN - 1520-6750
pISSN - 0894-069X
DOI - 10.1002/nav.20128
Subject(s) - capacity planning , heuristic , computer science , operations research , revenue , capacity management , product (mathematics) , revenue management , variance (accounting) , mathematical optimization , demand forecasting , reduction (mathematics) , economics , mathematics , accounting , artificial intelligence , operating system , computer network , geometry
Capacity planning decisions affect a significant portion of future revenue. In equipment intensive industries, these decisions usually need to be made in the presence of both highly volatile demand and long capacity installation lead times. For a multiple product case, we present a continuous‐time capacity planning model that addresses problems of realistic size and complexity found in current practice. Each product requires specific operations that can be performed by one or more tool groups. We consider a number of capacity allocation policies. We allow tool retirements in addition to purchases because the stochastic demand forecast for each product can be decreasing. We present a cluster‐based heuristic algorithm that can incorporate both variance reduction techniques from the simulation literature and the principles of a generalized maximum flow algorithm from the network optimization literature. © 2005 Wiley Periodicals, Inc. Naval Research Logistics, 2006