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THE EFFECTS OF LEAD TIME ON PLANT TIMING AND SIZE
Author(s) -
CHAOUCH BEN A.,
BUZACOTT JOHN A.
Publication year - 1994
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/j.1937-5956.1994.tb00108.x
Subject(s) - lead (geology) , lead time , computer science , operations management , environmental economics , economics , geology , geomorphology
An important issue in planning capacity expansion under uncertain demand is the effect of lead time on the timing of plant construction. Our model helps decide whether (1) plant construction is initiated after a certain deficit is accumulated, or (2) plant construction is initiated ahead of demand when a certain capacity surplus is reached. In addition to our analytical results, we present computational results to show that it is economically attractive to delay plant construction beyond the time when existing excess capacity becomes fully absorbed, with relatively short construction lead time.