Strategic facility location, capacity acquisition, and technology choice decisions under demand uncertainty: Robust vs. non-robust optimization approaches

Aldis Jakubovskis

European Journal of Operational Research, 2017, vol. 260, issue 3, 1095-1104

Abstract: This paper presents a robust optimization (RO) modeling approach to develop insights into strategic capacity planning and resource acquisition decisions, including the facility location problem and the technology choice problem. The main purpose of the proposed model and numerical experiments is to examine the effects of economies of scale, economies of scope, and the combined effects of scale and scope under uncertain demand realizations using robust optimization. The type of capacities, or technology alternatives, that a firm can acquire can be classified on two basic dimensions. The first dimension relates to the effects of scale via distinction between labor-intensive technologies and capital-intensive technologies. The second dimension relates to the effects of scope via distinction between product-dedicated and flexible technologies. Moreover, each product-dedicated and flexible technology can have different levels of labor or capital-intensity, leading to the joint effects of economies of scale and economies of scope. Extensive computational results document how the optimal technology choice patterns depend on the cost structures and levels of model robustness specified to accommodate uncertain demand realizations. The results obtained by the two-stage robust optimization approach are compared to the results obtained by a non-robust approach.

Keywords: Uncertainty modeling; Robust optimization; Strategic capacity planning; Technology choice; Flexible resources (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0377221717300528
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:260:y:2017:i:3:p:1095-1104

DOI: 10.1016/j.ejor.2017.01.017

Access Statistics for this article

European Journal of Operational Research is currently edited by Roman Slowinski, Jesus Artalejo, Jean-Charles. Billaut, Robert Dyson and Lorenzo Peccati

More articles in European Journal of Operational Research from Elsevier
Bibliographic data for series maintained by Catherine Liu ().