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Stochastic Capacity Models

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  • Richard J. Giglio

    (University of Massachusetts)

Abstract

Capacity of a facility is defined as its maximum rate of production. Although capacity can be changed by paying the appropriate capital costs, it is often impossible or undesirable to expand or contract capacity to meet exactly a time-varying demand. This paper presents work designed to help determine the optimal amount and timing of capacity expansions for situations where demand or facility life are stochastic. A series of models is developed to handle time stationary and nonstationary demand functions and approximations are presented allowing the use of modified deterministic models to solve stochastic problems.

Suggested Citation

  • Richard J. Giglio, 1970. "Stochastic Capacity Models," Management Science, INFORMS, vol. 17(3), pages 174-184, November.
    • Handle: RePEc:inm:ormnsc:v:17:y:1970:i:3:p:174-184
    DOI: 10.1287/mnsc.17.3.174
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    Cited by:

    1. Kimms, A, 1998. "Stability Measures for Rolling Schedules with Applications to Capacity Expansion Planning, Master Production Scheduling, and Lot Sizing," Omega, Elsevier, vol. 26(3), pages 355-366, June.
    2. Lee, Chia-Yen & Charles, Vincent, 2022. "A robust capacity expansion integrating the perspectives of marginal productivity and capacity regret," European Journal of Operational Research, Elsevier, vol. 296(2), pages 557-569.
    3. Jan A. Van Mieghem, 2003. "Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments," Manufacturing & Service Operations Management, INFORMS, vol. 5(4), pages 269-302, July.
    4. Santiago J. Gahn, 2022. "Towards an explanation of a declining trend in capacity utilisation in the US economy," Working Papers PKWP2214, Post Keynesian Economics Society (PKES).
    5. Qin, Ruwen & Nembhard, David A., 2012. "Demand modeling of stochastic product diffusion over the life cycle," International Journal of Production Economics, Elsevier, vol. 137(2), pages 201-210.
    6. Jikai Zou & Shabbir Ahmed & Xu Andy Sun, 2018. "Partially Adaptive Stochastic Optimization for Electric Power Generation Expansion Planning," INFORMS Journal on Computing, INFORMS, vol. 30(2), pages 388-401, May.
    7. Backe, Stian & Ahang, Mohammadreza & Tomasgard, Asgeir, 2021. "Stable stochastic capacity expansion with variable renewables: Comparing moment matching and stratified scenario generation sampling," Applied Energy, Elsevier, vol. 302(C).
    8. Sarah M. Ryan, 2003. "Capacity expansion with lead times and autocorrelated random demand," Naval Research Logistics (NRL), John Wiley & Sons, vol. 50(2), pages 167-183, March.
    9. Kavinesh J. Singh & Andy B. Philpott & R. Kevin Wood, 2009. "Dantzig-Wolfe Decomposition for Solving Multistage Stochastic Capacity-Planning Problems," Operations Research, INFORMS, vol. 57(5), pages 1271-1286, October.

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