Production capacity planning for multiple products under uncertain demand conditions

Jyh-Wen Ho and Chih-Chiang Fang

International Journal of Production Economics, 2013, vol. 141, issue 2, 593-604

Abstract: This study chiefly deliberates issues regarding capacity allocation for multiple products. When producing multiple products, a manufacturer needs to allocate a favorable production quantity to each product under conditions of uncertain demand since the excess or shortage of a product will in turn cause the loss of profit. The proposed model and the corresponding algorithm in this study are used to find out the optimal capacity allocation under the given probability density function of specific demands and to effectively allocate limited capacity to multiple products with an aim to maximize profit. Finally, the numerical example suggests that the marginal profit, the inventory holding cost, the shortage cost, the loss of excess production, and market demands should be considered in an effort to discover an optimal capacity allocation with regard to multiple products.

Keywords: Uncertain demand; Capacity allocation; Production cost; Newsvendor problem (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:141:y:2013:i:2:p:593-604

DOI: 10.1016/j.ijpe.2012.09.016

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