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Deterministic Capacity Expansion Under Deterioration

Author

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  • S. Rajagopalan

    (Department of Decision Systems, School of Business Administration, University of Southern California, Los Angeles, California 90089-1421)

Abstract

This paper considers the deterministic capacity expansion problem with deterioration. First, the paper extends the conventional model by incorporating capacity deterioration effects and operating costs that are a function of: (i) the age of the facility and (ii) the extent of utilization of capacity. The model still has the useful properties of the standard model, enabling the use of efficient algorithms. Second, the paper extends well-known planning horizon results to this model using a novel dual-based approach, which also provides additional intuition. Finally, interesting computational results are provided that compare optimal and near-optimal forecast horizon values. The impact of capacity deterioration and convexity in variable costs on forecast horizons is also considered.

Suggested Citation

  • S. Rajagopalan, 1992. "Deterministic Capacity Expansion Under Deterioration," Management Science, INFORMS, vol. 38(4), pages 525-539, April.
    • Handle: RePEc:inm:ormnsc:v:38:y:1992:i:4:p:525-539
    DOI: 10.1287/mnsc.38.4.525
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    Cited by:

    1. Milind Dawande & Srinagesh Gavirneni & Sanjeewa Naranpanawe & Suresh Sethi, 2007. "Forecast Horizons for a Class of Dynamic Lot-Size Problems Under Discrete Future Demand," Operations Research, INFORMS, vol. 55(4), pages 688-702, August.
    2. Lijian Lu & Xiaoming Yan, 2016. "Capacity investment decisions under risk aversion," Naval Research Logistics (NRL), John Wiley & Sons, vol. 63(3), pages 218-235, April.
    3. 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.
    4. Fuying Jing & Zirui Lan, 2017. "Forecast horizon of multi-item dynamic lot size model with perishable inventory," PLOS ONE, Public Library of Science, vol. 12(11), pages 1-15, November.
    5. Brahimi, Nadjib & Absi, Nabil & Dauzère-Pérès, Stéphane & Nordli, Atle, 2017. "Single-item dynamic lot-sizing problems: An updated survey," European Journal of Operational Research, Elsevier, vol. 263(3), pages 838-863.
    6. A. Marín & J. Salmerón, 2001. "A risk function for the stochastic modeling of electric capacity expansion," Naval Research Logistics (NRL), John Wiley & Sons, vol. 48(8), pages 662-683, December.
    7. Christian Thies & Christoph Hüls & Karsten Kieckhäfer & Jörg Wansart & Thomas S. Spengler, 2022. "Project portfolio planning under CO2 fleet emission restrictions in the automotive industry," Journal of Industrial Ecology, Yale University, vol. 26(3), pages 937-951, June.
    8. Vernon Ning Hsu, 2000. "Dynamic Economic Lot Size Model with Perishable Inventory," Management Science, INFORMS, vol. 46(8), pages 1159-1169, August.
    9. Suresh Chand & Vernon Ning Hsu & Suresh Sethi, 2002. "Forecast, Solution, and Rolling Horizons in Operations Management Problems: A Classified Bibliography," Manufacturing & Service Operations Management, INFORMS, vol. 4(1), pages 25-43, September.
    10. Vernon Ning Hsu, 2002. "Dynamic Capacity Expansion Problem with Deferred Expansion and Age-Dependent Shortage Cost," Manufacturing & Service Operations Management, INFORMS, vol. 4(1), pages 44-54, June.
    11. Chand, Suresh & McClurg, Tim & Ward, Jim, 2000. "A model for parallel machine replacement with capacity expansion," European Journal of Operational Research, Elsevier, vol. 121(3), pages 519-531, March.
    12. Brahimi, Nadjib & Dauzere-Peres, Stephane & Najid, Najib M. & Nordli, Atle, 2006. "Single item lot sizing problems," European Journal of Operational Research, Elsevier, vol. 168(1), pages 1-16, January.

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