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Capacity planning with technology replacement by stochastic dynamic programming

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  • Wang, Kung-Jeng
  • Nguyen, Phuc Hong

Abstract

Technology replacement is capital intensive and highly risky in fast-paced high-tech industries along lumpy demand. This article proposes a solution to decision-making related to (i) technology replacement policy and (ii) capacity plan of resources to satisfy customer demand under technological changes. The addressed problem is modeled by stochastic dynamic programming for technology replacement in conjunction with an integer programming for simultaneous capacity planning. The overall objective is to maximize the expected net present profit over a finite time horizon. The problem is solved by a pattern search-genetic algorithm. Experiment results indicate that a near optimal solution is achieved in finite time.

Suggested Citation

  • Wang, Kung-Jeng & Nguyen, Phuc Hong, 2017. "Capacity planning with technology replacement by stochastic dynamic programming," European Journal of Operational Research, Elsevier, vol. 260(2), pages 739-750.
    • Handle: RePEc:eee:ejores:v:260:y:2017:i:2:p:739-750
    DOI: 10.1016/j.ejor.2016.12.046
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    References listed on IDEAS

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    Cited by:

    1. Zhang, Qiao & Zhang, Jianxiong & Zaccour, Georges & Tang, Wansheng, 2018. "Strategic technology licensing in a supply chain," European Journal of Operational Research, Elsevier, vol. 267(1), pages 162-175.
    2. Nathalia Wolf & Pablo Escalona & Mónica López-Campos & Alejandro Angulo & Jorge Weston, 2023. "On Carbon Tax Effectiveness in Inducing a Clean Technology Transition: An Evaluation Based on Optimal Strategic Capacity Planning," Sustainability, MDPI, vol. 15(15), pages 1-23, July.
    3. 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).
    4. Amor Chowdhury & Saša Klampfer & Klemen Sredenšek & Sebastijan Seme & Miralem Hadžiselimović & Bojan Štumberger, 2022. "Method for Planning, Optimizing, and Regulating EV Charging Infrastructure," Energies, MDPI, vol. 15(13), pages 1-32, June.
    5. Liu, Kanglin & Liu, Changchun & Xiang, Xi & Tian, Zhili, 2023. "Testing facility location and dynamic capacity planning for pandemics with demand uncertainty," European Journal of Operational Research, Elsevier, vol. 304(1), pages 150-168.

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