Operations Research and Capacity Expansion Problems: A Survey

Luss, Hanan

doi:10.1287/opre.30.5.907

Cited by 403 publications

(169 citation statements)

References 95 publications

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“…The capacity expansion literature in operations research is concerned with determining the size, timing, and location of buying additional capacity, according to Luss (1982), which is the latest comprehensive survey to our knowledge. In the beginning, the field's basic concern was how to meet the growing demand in growing economies.…”

Section: Capacity Research and Related Literaturesmentioning

confidence: 99%

“…Often, this literature is deterministic and focuses on minimizing the (discounted) cost of all expansions. Some authors allow for uncertainty: Examples of "post- Luss (1982)," which is the focus of this paper, include Davis et al (1987), Paraskevopoulos et al (1991), and Bean et al (1992). This stream of research is very much related to our topic, but is typically restricted to the expansion of capacity of one resource and cost minimization.…”

Section: Capacity Research and Related Literaturesmentioning

confidence: 99%

“…In contrast, however, infrequent and major capacity adjustments typically stem from some friction or nonlinearity in the adjustment costs and often enjoy economies of scale, implying that C t · is concave. For example, at the firm level, there is often a fixed cost associated with making any capacity adjustment, creating a discontinuity in C t at 0 C t 0 = 0, while Luss (1982) gives two often-used adjustment cost functions that exhibit economies of scale. The first one, called the "fixed charge" cost function, is the affine version of (3), but with a discontinuity at 0.…”

Section: Capacity Adjustment Costsmentioning

confidence: 99%

See 2 more Smart Citations

Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments

Mieghem

2003

M&SOM

512

240

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T his paper reviews the literature on strategic capacity management concerned with determining the sizes, types, and timing of capacity investments and adjustments under uncertainty. Specific attention is given to recent developments to incorporate multiple decision makers, multiple capacity types, hedging, and risk aversion. Capacity is a measure of processing abilities and limitations and is represented as a vector of stocks of various processing resources, while investment is the change of capacity and includes expansion and contraction. After discussing general issues in capacity investment problems, the paper reviews models of capacity investment under uncertainty in three settings:The first reviews optimal capacity investment by single and multiple risk-neutral decision makers in a stationary environment where capacity remains constant. Allowing for multiple capacity types, the associated optimal capacity portfolio specifies the amounts and locations of safety capacity in a processing network. Its key feature is that it is unbalanced; i.e., regardless of how uncertainties are realized, one typically will never fully utilize all capacities. The second setting reviews the adjustment of capacity over time and the structure of optimal investment dynamics. The paper ends by reviewing how to incorporate risk aversion in capacity investment and contrasts hedging strategies involving financial versus operational means.

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Section: Capacity Research and Related Literaturesmentioning

confidence: 99%

Section: Capacity Research and Related Literaturesmentioning

confidence: 99%

Section: Capacity Adjustment Costsmentioning

confidence: 99%

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Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments

Mieghem

2003

M&SOM

512

240

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“…The expansion cost C(∆Q) may take several forms, such as linear, power or step cost function (Luss 1982). If capacity expansion is a one time decision, then the manufacturer's problem is to solve min ∆Q {C(∆Q) + J t (x, O|Q + ∆Q)}.…”

Section: Advance Demand Informationmentioning

confidence: 99%

Inventory Management: Information, Coordination, and Rationality

Özer

2010

International Series in Operations Research &Amp; Management Science

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The success of a product in today's global marketplace depends on capabilities of firms in the product's supply chain. Among these capabilities, effective inventory management is a capability necessary to lead in the global marketplace. The chapter provides a discussion of four fundamentals of effective inventory management. First, it requires managers to know how best to use available information. Second, managers need to quantify the value of information. Third, they need to coordinate decentralized inventory operations. Finally, effective inventory management requires decision tools that can be embraced by their users. The chapter's emphasis is on the use of information, and the role of new information technologies in inventory management. Previous research on inventory management played an important role in the advancement and development of new technologies and processes. Today more research is needed because new technologies (such as RFID Radio-Frequency Identification) and new management methods (such as collaborative forecasting and planning) are emerging and evolving faster than ever before. Inventory management and research will continue to play a central role in the success of a product and the firms in its supply chain. The chapter brings together separate but inherently related streams of research in inventory management. By doing so, we highlight potential research opportunities that lie on the boundaries.

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“…Srinivasan also assumed that technology is static, the construction lead time for adding new capacity is zero, and demand growth is deterministic. A survey of Luss [15] can be consulted as an extensive literature review on capacity expansion. In his survey, Luss unified the existing literature, emphasizing modeling approaches, algorithmic solutions and relevant application.…”

Section: Relevant Capacity Expansion Studiesmentioning

confidence: 99%

The Effect of Technological Improvement on Capacity Expansion for Uncertain Exponential Demand With Lead Times

Pak

Pornsalnuwat

Ryan

2004

The Engineering Economist

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We formulate a model of capacity expansion that is relevant to a service provider for whom the cost of capacity shortages would be considerable but difficult to quantify exactly. Due to demand uncertainty and a lead time for adding capacity, not all shortages are avoidable. In addition, technological innovations will reduce the cost of adding capacity but may not be completely predictable. Analytical expressions for the infinite horizon expansion cost and shortages are optimized numerically. Sensitivity analyses allow us to determine the impact of technological change on the optimal timing and sizes of capacity expansions to account for economies of scale, the time value of money and penalties for insufficient capacity. The Effect of Technological Improvement on Capacity Expansion for Uncertain Exponential Demand with Lead Times AbstractWe formulate a model of capacity expansion that is relevant to a service provider for whom the cost of capacity shortages would be considerable but difficult to quantify exactly. Due to demand uncertainty and a lead time for adding capacity, not all shortages are avoidable. In addition, technological innovations will reduce the cost of adding capacity but may not be completely predictable. Analytical expressions for the infinite horizon expansion cost and shortages are optimized numerically. Sensitivity analyses allow us to determine the impact of technological change on the optimal timing and sizes of capacity expansions to account for economies of scale, the time value of money and penalties for insufficient capacity.

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Operations Research and Capacity Expansion Problems: A Survey

Cited by 403 publications

References 95 publications

Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments

Commissioned Paper: Capacity Management, Investment, and Hedging: Review and Recent Developments

Inventory Management: Information, Coordination, and Rationality

The Effect of Technological Improvement on Capacity Expansion for Uncertain Exponential Demand With Lead Times

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