An Economic Capacity Planning Model Considering Inventory and Capital Time Value

A company needs to implement several make-to-stock policies apart from a regular make-to-order production, so that the capacity of expensive resources can be fully utilized. The constraints to be considered in such capacity planning problem include finite budget for investing resources, lump demands of customers, decline of products price with time, different product mix for simultaneous manufacturing, time value of capital asset, technology levels of resources, and limited capacity of resources. We focus on the issues of resources acquisition and allocation decision in each production period. The goal is to maximize the longterm profit. This study formulates the problem as a non-linear mixed integer mathematical programming model. A constraint programming based genetic algorithm is developed to solve the problem efficiently.