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An innovative approach for strategic capacity portfolio planning under uncertainties

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  • Wu, Cheng-Hung
  • Chuang, Ya-Tang

Abstract

This research studies multi-generation capacity portfolio planning problems under various uncertainty factors. These uncertainty factors include price uncertainties, demand fluctuation and uncertain product life cycle. The objective of this research is to develop an efficient algorithm that generates capacity portfolio policies robust to aforementioned uncertainties. We model this capacity portfolio planning problem using Markov decision processes (MDP). In this MDP model, we consider two generation of manufacturing technology. The new generation capacity serves as a flexible resource that can be used to downward fulfill the deficiency of old generation capacity. The objective of this MDP model is to maximize the expected profit under uncertainties. An efficient algorithm is proposed to solve the problem and provide an optimal capacity expansion policy for both types of capacity. Moreover, we show that the optimal capacity expansion policy can be characterized by a monotone structure. We verify our results by detail simulation study.

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  • Wu, Cheng-Hung & Chuang, Ya-Tang, 2010. "An innovative approach for strategic capacity portfolio planning under uncertainties," European Journal of Operational Research, Elsevier, vol. 207(2), pages 1002-1013, December.
    • Handle: RePEc:eee:ejores:v:207:y:2010:i:2:p:1002-1013
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    Cited by:

    1. Phuc Hong Nguyen & Kung-Jeng Wang, 2019. "Strategic capacity portfolio planning under demand uncertainty and technological change," Flexible Services and Manufacturing Journal, Springer, vol. 31(4), pages 926-944, December.
    2. Martínez-Costa, Carme & Mas-Machuca, Marta & Benedito, Ernest & Corominas, Albert, 2014. "A review of mathematical programming models for strategic capacity planning in manufacturing," International Journal of Production Economics, Elsevier, vol. 153(C), pages 66-85.
    3. Chien, Chen-Fu & Wu, Cheng-Hung & Chiang, Yu-Shian, 2012. "Coordinated capacity migration and expansion planning for semiconductor manufacturing under demand uncertainties," International Journal of Production Economics, Elsevier, vol. 135(2), pages 860-869.
    4. Sabet, Ehsan & Yazdani, Baback & Kian, Ramez & Galanakis, Kostas, 2020. "A strategic and global manufacturing capacity management optimisation model: A Scenario-based multi-stage stochastic programming approach," Omega, Elsevier, vol. 93(C).
    5. Lin, James T. & Chen, Tzu-Li & Chu, Hsiao-Ching, 2014. "A stochastic dynamic programming approach for multi-site capacity planning in TFT-LCD manufacturing under demand uncertainty," International Journal of Production Economics, Elsevier, vol. 148(C), pages 21-36.
    6. Chen-Yang Cheng & Pourya Pourhejazy & Tzu-Li Chen, 2023. "Computationally efficient approximate dynamic programming for multi-site production capacity planning with uncertain demands," Flexible Services and Manufacturing Journal, Springer, vol. 35(3), pages 797-837, September.

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