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Optimal Acquisition of Automated Flexible Manufacturing Processes

Author

Listed:
  • George E. Monahan

    (University of Illinois, Champaign, Illinois)

  • Timothy L. Smunt

    (Washington University, St. Louis, Missouri)

Abstract

We formulate the problem of converting a labor-intensive batch production process to one that incorporates flexible automation as a finite-state Markov decision process. Interest rates and the level of automated technology influence both operating and acquisition costs and are treated as random variables. The model specifies the optimal level of capacity to convert to flexible automation. The optimization criterion is the minimization of the sum of expected, discounted costs incurred over a finite planning horizon. The optimal acquisition strategy depends upon the time period, the current interest rate, the current level of technology, and a measure of the remaining capacity that is not automated. We investigate the structure of optimal acquisition strategies using mathematical analysis and simulation. Our objective is to illustrate the qualitative characteristics of optimal strategies for acquiring flexible automation. As a step toward the implementation of the model, we examine the qualitative consequences associated with specifying classes of inventory and acquisition cost functions.

Suggested Citation

  • George E. Monahan & Timothy L. Smunt, 1989. "Optimal Acquisition of Automated Flexible Manufacturing Processes," Operations Research, INFORMS, vol. 37(2), pages 288-300, April.
    • Handle: RePEc:inm:oropre:v:37:y:1989:i:2:p:288-300
    DOI: 10.1287/opre.37.2.288
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    Citations

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    Cited by:

    1. Chen, Chialin & Monahan, George E., 2010. "Environmental safety stock: The impacts of regulatory and voluntary control policies on production planning, inventory control, and environmental performance," European Journal of Operational Research, Elsevier, vol. 207(3), pages 1280-1292, December.
    2. Shang, Jen & Sueyoshi, Toshiyuki, 1995. "A unified framework for the selection of a Flexible Manufacturing System," European Journal of Operational Research, Elsevier, vol. 85(2), pages 297-315, September.
    3. Ramasesh, Ranga V. & Jayakumar, Maliyakal D., 1997. "Inclusion of flexibility benefits in discounted cash flow analyses for investment evaluation: A simulation/optimization model," European Journal of Operational Research, Elsevier, vol. 102(1), pages 124-141, October.

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