Capacity and flexibility planning of an economical manufacturing system

This paper presents a simple dynamic model for determining the capacity and the flexibility of a manufacturing system over a finite planning horizon. We consider a problem that arises from the development phase of an investment plan for an economical manufacturing system. The objective is to minimize the total cost associated with the capacity expansion, flexibility expansion and operation. This problem is formulated as an integer program. A Lagrangian heuristic is developed for determining a near optimal solution to this integer program. Finally, we show how to incorporate aggregate production planning into the model.Based on a presentation given at the ORSA/TIMS Miami meeting in 1986.