IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v31y1985i12p1523-1532.html
   My bibliography  Save this article

Optimal Capacity Expansion Over an Infinite Horizon

Author

Listed:
  • James C. Bean

    (Department of Industrial and Operations Engineering, The University of Michigan, Ann Arbor, Michigan 48109)

  • Robert L. Smith

    (Department of Industrial and Operations Engineering, The University of Michigan, Ann Arbor, Michigan 48109)

Abstract

The problem of choosing an optimal initial capacity expansion from a finite number of durable facility sizes is affected by potential future expansion decisions. As we consider such expansions over longer and longer study horizons, the optimal initial facility choice can fluctuate due to end-of-study effects. We discuss an algorithm that will determine, for arbitrary deterministic demand profiles, how long a horizon is sufficient to reach stability in the first facility choice. Moreover, it is shown that this first choice is the optimal first choice for the infinite horizon problem. We also establish an explicit analytical formula for a study horizon guaranteed to provide a first facility size that, followed by an infinite horizon expansion strategy, will attain a discounted cost within a predetermined maximal error of the optimal infinite horizon cost.

Suggested Citation

  • James C. Bean & Robert L. Smith, 1985. "Optimal Capacity Expansion Over an Infinite Horizon," Management Science, INFORMS, vol. 31(12), pages 1523-1532, December.
    • Handle: RePEc:inm:ormnsc:v:31:y:1985:i:12:p:1523-1532
    DOI: 10.1287/mnsc.31.12.1523
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.31.12.1523
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.31.12.1523?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William P. Cross & H. Edwin Romeijn & Robert L. Smith, 1998. "Approximating Extreme Points of Infinite Dimensional Convex Sets," Mathematics of Operations Research, INFORMS, vol. 23(2), pages 433-442, May.
    2. Huang, Kai & Ahmed, Shabbir, 2010. "A stochastic programming approach for planning horizons of infinite horizon capacity planning problems," European Journal of Operational Research, Elsevier, vol. 200(1), pages 74-84, January.
    3. De', Rahul & May, Jerrold H, 1998. "Using Operational Planning Horizons for Determining Setup Changes," Omega, Elsevier, vol. 26(5), pages 581-592, October.
    4. Julka, Nirupam & Baines, Tim & Tjahjono, Benny & Lendermann, Peter & Vitanov, Val, 2007. "A review of multi-factor capacity expansion models for manufacturing plants: Searching for a holistic decision aid," International Journal of Production Economics, Elsevier, vol. 106(2), pages 607-621, April.
    5. Rahul R. Marathe & Sarah M. Ryan, 2009. "Capacity expansion under a service‐level constraint for uncertain demand with lead times," Naval Research Logistics (NRL), John Wiley & Sons, vol. 56(3), pages 250-263, April.
    6. O. Zeynep Akşin, 2007. "On valuing appreciating human assets in services," Naval Research Logistics (NRL), John Wiley & Sons, vol. 54(2), pages 221-235, March.
    7. Alexandar Angelus & Evan L. Porteus, 2002. "Simultaneous Capacity and Production Management of Short-Life-Cycle, Produce-to-Stock Goods Under Stochastic Demand," Management Science, INFORMS, vol. 48(3), pages 399-413, March.
    8. Ryan, Sarah M., 1998. "Forecast frequency in rolling horizon hedging heuristics for capacity expansion," European Journal of Operational Research, Elsevier, vol. 109(3), pages 550-558, September.
    9. Hongmin Li & Stephen C. Graves & Woonghee Tim Huh, 2014. "Optimal Capacity Conversion for Product Transitions Under High Service Requirements," Manufacturing & Service Operations Management, INFORMS, vol. 16(1), pages 46-60, February.
    10. James C. Bean & Jack R. Lohmann & Robert L. Smith, 1994. "Equipment replacement under technological change," Naval Research Logistics (NRL), John Wiley & Sons, vol. 41(1), pages 117-128, February.
    11. Poretus, Evan L. & Angelus, Alexander, 2000. "Simultaneous Production and Capacity Management under Stochastic Demand for Perishable Goods," Research Papers 1419r, Stanford University, Graduate School of Business.
    12. 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.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:inm:ormnsc:v:31:y:1985:i:12:p:1523-1532. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.