Title: Stochastic modelling and optimisation of multi-plant capacity planning problem

Authors: Anoop Verma; Nagesh Shukla; Satish Tyagi; Nishikant Mishra

Addresses: Department of Industrial and Systems Engineering, Wayne State University, Detroit, MI, 48201, USA ' SMART Infrastructure Facility, University of Wollongong, Wollongong, NSW, 2522, Australia ' Department of Industrial and Systems Engineering, Wayne State University, Detroit, MI, 48201, USA ' School of Management and Business, Aberystwyth University, Rheidol Building, Aberystwyth, SY23 3AL, UK

Abstract: In this paper, the problem of capacity planning under risk from demand and price/cost uncertainty of the finished products is addressed. The deterministic model is extended into a two-stage stochastic model with fixed recourse by means of various expected levels of demand as random. A recourse penalty is also included in the objective for both shortage and surplus in the finished products. The model is analysed to quantify the risk using Markowitz mean-variance model.

Keywords: multi-plant capacity planning; stochastic optimisation; AMPL/CPLEX; Markowitz mean variance; stochastic modelling; uncertainty; recourse penalty; risk assessment.

DOI: 10.1504/IJIEI.2014.066209

International Journal of Intelligent Engineering Informatics, 2014 Vol.2 No.2/3, pp.139 - 165

Received: 06 Aug 2013
Accepted: 14 Apr 2014
Published online: 20 Dec 2014 *

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