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The Simultaneous Planning of Production, Capacity, and Inventory in Seasonal Demand Environments

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  • James R. Bradley

    (The S.C. Johnson Graduate School of Management, Cornell University, Ithaca, New York 14853-6201)

  • Bruce C. Arntzen

    (Global Supply Chain Associates, 6 Mockingbird Lane, Maynard, Massachusetts 01754-2254)

Abstract

Manufacturing managers often address capacity and inventory decisions separately, thus ignoring the interaction between capacity and inventory within a manufacturing system. The separation of these two decisions can lead to an imbalance of capacity and inventory investment. We develop a model that simultaneously plans capacity investment, inventory investment, and the production schedule using return on assets as the objective to maximize. An algorithm is developed that optimizes a fractional objective function for a mixed-integer program. The model was applied at an electronics manufacturer and at a manufacturer of office supplies.

Suggested Citation

  • James R. Bradley & Bruce C. Arntzen, 1999. "The Simultaneous Planning of Production, Capacity, and Inventory in Seasonal Demand Environments," Operations Research, INFORMS, vol. 47(6), pages 795-806, December.
    • Handle: RePEc:inm:oropre:v:47:y:1999:i:6:p:795-806
    DOI: 10.1287/opre.47.6.795
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    References listed on IDEAS

    as
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