A CAPACITY PLANNING MODEL FOR A MULTI-PRODUCT FACILITY

A deterministic capacity planning model for a multi-product facility is analyzed to determine (he sizes to be expanded (or disposed of) in each period so as to supply the known demand for N products on time and to minimize the total cost incurred over a finite planning horizon of T periods. The model assumes that each capacity unit of the facility simultaneously serves a prespecified number of demand units of each product, that costs considered include capacity expansion costs, capacity disposal costs, and excess (idle) capacity holding costs, and all the associated cost functions are nondecreasing and concave, and that backlogging is not allowed. The structure of an optimal solution is characterized and then used in developing an efficient dynamic programming algorithm that finds optimal capacity planning policies. The required computational effort is a polynomial function of N and T.