Presentation
Capacity Expansion for Uncertain Demand with Initial Shortages
Proceedings of the 2005 Industrial Engineering Research Conference
Document Type
Conference Proceeding
Publication Version
Published Version
Publication Date
1-1-2005
Conference Title
IIE Annual Conference
Conference Date
2005
Abstract
For service providers, uncertain demand for capacity and expansion lead time may create unavoidable capacity shortages, which may be allowed to accumulate before initiating an expansion. For the demand following a geometric Brownian motion process, we assume a stationary expansion policy where the timing and size of expansion are determined as fixed proportions of the capacity position. We define the service level in terms of the capacity shortages, which can be evaluated by applying pricing formulae for barrier options in finance. We observe the relationship between the two policy parameters at different specified service levels and for other model parameters.
Copyright Owner
IIE
Copyright Date
2005
Language
en
File Format
application/pdf
Citation Information
Rahul R. Marathe and Sarah M. Ryan. "Capacity Expansion for Uncertain Demand with Initial Shortages" Proceedings of the 2005 Industrial Engineering Research Conference (2005) Available at: http://works.bepress.com/sarah_m_ryan/108/
This is a proceeding published as Rahul R. Marathe and Sarah M. Ryan; Capacity Expansion for Uncertain Demand with Initial Shortages. IIE Annual Conference. Proceedings, 2005. Posted with permission.