Browsing by Subject "Flexible Capacity"

Now showing 1 - 2 of 2

Open Access
Integrated capacity and inventory management with capacity acquisition lead times
(Elsevier, 2009-08-01) Mincsovicz, G.; Tan, T.; Alp, O.
We model a make-to-stock production system that utilizes permanent and contingent capacity to meet non-stationary stochastic demand, where a constant lead time is associated with the acquisition of contingent capacity. We determine the structure of the optimal solution concerning both the operational decisions of integrated inventory and flexible capacity management, and the tactical decision of determining the optimal permanent capacity level. Furthermore, we show that the inventory (either before or after production), the pipeline contingent capacity, the contingent capacity to be ordered, and the permanent capacity are economic substitutes. We also show that the stochastic demand variable and the optimal contingent capacity acquisition decisions are economic complements. Finally, we perform numerical experiments to evaluate the value of utilizing contingent capacity and to study the effects of capacity acquisition lead time, providing useful managerial insights.
Open Access
Integrated flexible capacity and inventory management under flexible capacity uncertainty
(2006) Paç, Mehmet Fazıl
In a manufacturing environment with volatile demand, inventory management can be coupled with dynamic capacity adjustments for handling the fluctuations more effectively. In this study we consider the integrated management of inventory and flexible capacity management under seasonal stochastic demand and uncertain labor supply. The capacity planning problem is investigated from the workforce planning perspective. We consider a manufacturing firm that can temporarily increase its production capacity by utilizing contingent workers from an external labor supply agency. The uncertainty of contingent capacity arises from the (un)availability of contingent workers, the pool size and the behavior of the labor supply agency. Using a dynamic programming approach, we formulate an infinite horizon model determining the optimal levels of permanent and contracted capacity, in order to minimize the total cost of operations. Within the dynamic program, we determine the optimal operational capacity decisions, namely the size of contracted and contingent capacity to be utilized in each period. The characteristics of the optimal policies are analyzed under an infinite horizon setting. In addition we consider temporary labor contracts, that diminish the effects of supply uncertainty on the manufacturer, at a specific contracting cost. Our analysis shows that as the supply uncertainty and/or the expected cost of utilizing contingent workers increase, the value of temporary labor contracts also increase. In contrast increasing demand variability reduces the incentive of the manufacturer to own capacity and increases the utilization of contingent resources.