Single-site strategic capacity planning considering renewal, maintenance, inventory, taxes and cash flow management

Ernest Benedito, Albert Corominas, Carme Martínez and Marta Mas-Machuca
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Ernest Benedito: Universitat Politècnica de Catalunya (UPC), Barcelona, Spain
Albert Corominas: Universitat Politècnica de Catalunya (UPC), Barcelona, Spain
Carme Martínez: Universitat Politècnica de Catalunya (UPC), Barcelona, Spain
Marta Mas-Machuca: Universitat Internacional de Catalunya, Barcelona, Spain

Journal of the Operational Research Society, 2016, vol. 67, issue 7, 970-981

Abstract: This paper deals with strategic capacity planning of a single-site manufacturing system. We propose a MILP model that includes relevant business aspects and possibilities, some of which are only partially or not at all found in the literature. Specifically, we consider decisions on expansion, reduction and renewal of production capacity, and acquisition of storage capacity. In addition, we model aspects such as (a) maintenance costs and unit variable costs depending, respectively, on age and characteristics of facilities, (b) seasonality of the demand and (c) cash flow management, including taxes and, therefore, depreciation of assets. The model maximises the after-tax cash balance at the end of the planning horizon. We also present a computational experiment with 54 instances to show that the model can be solved for a wide range of sizes in a reasonable computing time using comercial software.

Date: 2016
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