Size and Timing for Capacity Expansion Under Demand Uncertainty PDF Download

Author: Már Karlsson
Publisher:
ISBN:
Category : Capital investments
Languages : en
Pages : 80

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Author: Bashyam T. C. A.
Publisher:
ISBN:
Category : Prices
Languages : en
Pages : 164

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Author: Rahul Ratnakar Marathe
Publisher:
ISBN:
Category :
Languages : en
Pages : 278

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Book Description
For a service provider, stochastic demand growth along with expansion lead times and economies of scale may complicate a capacity planning problem. We consider a service provider who has to maintain certain minimum level of service and is interested in knowing the optimal timings and sizes of the future capacity expansions. This service level is defined in terms of unsatisfied demand over an expansion cycle. Under this service level constraint, the service provider wants to minimize the infinite time horizon cost of expansion. We assume a stationary policy where the timing and the sizes of the expansions are determined as fixed proportions of the capacity position, where the capacity position is the capacity that will be available when the current expansion is completed. We assume that the demand for the capacity follows a geometric Brownian motion (GBM) process. We discuss a method to check the GBM process fit for any data series representing the demand values and find that the data for electric utility consumption in the US, and the airline passenger enplanement data over a period of 15 years satisfy the assumptions of a GBM process. Using properties of the demand process, we can use financial option pricing theory to express the service level in terms of the decision variables. Particularly, we use the Up-and-Out partial barrier call option price expression to formulate the service level constraint. We use cutting plane algorithm to solve the optimization problem. Numerical optimization shows that it could be optimal to accumulate initial shortage before initiating the next capacity expansions for a low growth; low volatility demand and also when the expansion lead times are shorter. However, when the demand grows at a high rate or is more volatile, it is optimal to start the next expansion project before the demand reaches the current capacity position.

Author: Mark H.A Davis
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Capacity expansion is the process of providing new facilities over time to meet rising demand. A general mathematical model of this process is presented, incorporating uncertain future demand (including the possibility of 'surprises'), non-zero lead times and random cost overruns. In this model the decision maker controls the rate of investment in the current expansion project. Optimization is studied by methods of stochastic control theory. Numerical algorithms are presented which determine the optimal policy in some simple cases.

Author: Malcolm W. Kirby
Publisher:
ISBN:
Category : Economic policy
Languages : en
Pages : 204

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Book Description
The paper is concerned with optimal policies for a sequence of discrete capacity expansions in response to expected growth in demand over an arbitrary time interval. Demand refers to a single commodity. For each expansion, there are two decision variables: the size of the expansion and the time at which it occurs. Capacity expansion over time is a step function. Discounting is continuous. The problem is analogous to a class of inventory problems in which order quantities are substituted for capacity increases.

Author: Athena Tianran Wu
Publisher:
ISBN:
Category : Electric power production
Languages : en
Pages : 198

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Book Description
Electricity generation is a very capital intensive industry. When faced with demand uncertainty, long-term investment commitments can translate into significant future costs. The push for renewable energy has added another layer of supply uncertainty to the complex capacity expansion problem to determine the type, size and timing of new plants. Capacity expansion planning in electricity generation is convention- ally based on the long-run marginal cost of generation plants. How- ever, as intermittent generation (such as wind) grows in the supply mix, marginal-cost based plant economics no longer apply due to the "non-dispatchable" nature of these new generations. More flexibility is required to supply the system reliably, but this factor is not considered in traditional plant economic models. A Markov Decision Process (MDP) based capacity planning model is one way to take generation flexibility into account and gain insights into the supply mix required to supplement a system with more intermittency. We describe a model treating the uncertainty in wind as a Markov Chain and the short-term operation of electricity plant as an average reward MDP. This problem's LP formulation can be augmented by binary variables defining investment actions, leading to a mixed-integer program. The impact of increasing wind penetration on generation as well as transmission investment is explored. Stochastic programming models are used to add more details to the system: transmission planning and the spatial dependence of wind and demand can be taken into account in a multi-node system; time- staged investments that account for long-term change such as increasing demand are also explored. Three levels of granularity of uncertainty are accessed: the very short-term uncertainty such as wind generation avail- ability is handled in the MDP model the medium-term uncertainty such as hydro generation availability (inflows and storage) can be handled by seasonal complexity in such models the long-term uncertainty such as demand/supply mix changes and policy changes can be handled by a tree-structured stochastic program We develop an innovative model framework to evaluate generation capacity investment decisions in a world with both fine and coarse grain uncertainties, and provide a new way of modelling plant economics under renewable-induced uncertainty.

Author:
Publisher:
ISBN:
Category :
Languages : en
Pages : 14

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Book Description

Author: Jianbin Li
Publisher: Springer Nature
ISBN: 9811965773
Category : Business & Economics
Languages : en
Pages : 258

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Book Description
This book aims at providing cases with inspiring findings for global researchers in capacity allocation and reservation. Capacity allocation mechanisms are introduced in the book, as well as the measures to build models and the ways to achieve supply chain coordination. In addition, it illustrates the capacity reservation contract and quantity flexible contract with comparisons and some numerical studies. The book is divided into 7 chapters. Chapter 1 introduces the background and the latest development of the research. Chapter 2 introduces how to manage downstream competition through capacity allocation in symmetric market, including proportional mechanism and lexicographic mechanism. Demand competition is introduced in Chapter 3 as well as the uniform allocation mechanism and the comparisons among three different mechanisms. In Chapter 4, we give information about demand competition with fixed factor allocation, and the comparison with other allocations. Chapter 5 provides the optimal strategies under fixed allocation with multiple retailers and the impacts of fixed proportions. Chapter 6 illustrates how to achieve supply chain coordination through capacity reservation contract and its comparison with the quantity flexibility contract, and in Chapter 7 we describe outsourcing decisions and order policies in different systems with some numerical studies. We sincerely hope that this book can provide some useful suggestions and inspirations for scholars around the world who have the same interests in this field.

Author: Katja Windt
Publisher: Springer Science & Business Media
ISBN: 3642307493
Category : Technology & Engineering
Languages : en
Pages : 553

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Book Description
This contributed volume collects research papers, presented at the CIRP Sponsored Conference Robust Manufacturing Control: Innovative and Interdisciplinary Approaches for Global Networks (RoMaC 2012, Jacobs University, Bremen, Germany, June 18th-20th 2012). These research papers present the latest developments and new ideas focusing on robust manufacturing control for global networks. Today, Global Production Networks (i.e. the nexus of interconnected material and information flows through which products and services are manufactured, assembled and distributed) are confronted with and expected to adapt to: sudden and unpredictable large-scale changes of important parameters which are occurring more and more frequently, event propagation in networks with high degree of interconnectivity which leads to unforeseen fluctuations, and non-equilibrium states which increasingly characterize daily business. These multi-scale changes deeply influence logistic target achievement and call for robust planning and control strategies. Therefore, understanding the cause and effects of multi-scale changes in production networks is of major interest. New methodological approaches from different science disciplines are promising to contribute to a new level comprehension of network processes. Unconventional methods from biology, perturbation ecology or auditory display are gaining increasing importance as they are confronted with similar challenges. Advancements from the classical disciplines such as mathematics, physics and engineering are also becoming of continuing importance.

Author: Bahareh Eghtesadi
Publisher:
ISBN:
Category :
Languages : en
Pages : 52

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Book Description
We study a multi-stage capacity expansion problem under demand uncertainty. We consider the problem where there are multiple resources to be expanded at each stage. Moreover, the resources have limited life time after acquisition. Our goal is to determine the time and size of each resource to be expanded so that the expected expansion cost of capacities is minimized. Therefore, we formulate the problem as a multi-stage stochastic mixed-integer program. Capacity shortage and excess are allowed subject to a joint chance constraint. We apply the multi-stage stochastic mixed-integer model to formulate vaccine vial opening decisions in the health clinics. This formulation enables us to find the optimal combination of vial sizes to be opened. Additionally, a trade off between vaccine wastage and shortage can be addressed using the chance constraint. We provide a branch and price algorithm based on a nodal decomposition to solve the model. In addition, a heuristic algorithm is proposed to solve the subproblems where the life time of the resources is limited to one period. We implement the branch and price algorithm assuming continuous capacity expansion decisions. Computational results are presented for the vaccine vial opening problem with three vial sizes; 1-, 5-, and 10-doses. The primary results indicate the strength of the proposed algorithm in solving problems with large dimensions. Moreover we report results that indicate the usage of 10-dose vials and the portion of 10-dose vials in the total vaccine usage increases with the arrival rate. Although the total usage of 1- and 5- dose vials increase with the arrival rate, their portion in the total vaccine usage decreases. This implies that vaccination wastage or shortage can be managed by keeping moderate amount of smaller size vials while supplying most of the demand using larger vial sizes to benefit from the economies of scale.