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Strategic capacity portfolio planning under demand uncertainty and technological change

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  • Phuc Hong Nguyen

    (National Taiwan University of Science and Technology
    Can Tho University)

  • Kung-Jeng Wang

    (National Taiwan University of Science and Technology)

Abstract

High-tech industries are experiencing accelerated technological change, which causes rapid obsolescence of invested manufacturing equipment. In such environment, the impact of the new technologies must be carefully considered while making decisions involved in resource acquisition or replacement. In this study, we consider a capacity planning problem with the presence of uncertain magnitude and timing of new technologies and stochastic demands. This study targets of determining (1) the most profitable technology portfolio investment, (2) the corresponding resource levels, and (3) the production plan to fully utilize the capacity. The research problem is modeled by Markov decision process (MDP). The objective is to maximize expected profit under demand and technology uncertainties. For solution efficiency, the Intlinprog solver is utilized to find the optimal action at each decision epoch, accompanying with a parallel computing mechanism to relax the computational burden of the MDP model. Through experiments, we demonstrate the effectiveness of the proposed model, and highlight the importance of considering uncertain factors.

Suggested Citation

  • Phuc Hong Nguyen & Kung-Jeng Wang, 2019. "Strategic capacity portfolio planning under demand uncertainty and technological change," Flexible Services and Manufacturing Journal, Springer, vol. 31(4), pages 926-944, December.
    • Handle: RePEc:spr:flsman:v:31:y:2019:i:4:d:10.1007_s10696-019-09335-w
    DOI: 10.1007/s10696-019-09335-w
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    References listed on IDEAS

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