Decision rule-based method for flexible multi-facility capacity expansion problem
Author(s)
Zhao, Sixiang
Haskell, William Benjamin
Cardin, Michel-Alexandre
Type
Journal Article
Abstract
Strategic capacity planning for multiple-facility systems with flexible designs is an important topic in the area of capacity expansion problems with random demands. The difficulties of this problem lie in the multidimensional nature of its random variables and action space. For a single-facility problem, the decision rule method has been shown to be efficient in deriving desirable solutions, but for a Multiple-facility Capacity Expansion Problem (MCEP), it has not been well studied. This article designs a novel decision rule–based method for the solution of an MCEP with multiple options, discrete capacity, and a concave capacity expansion cost. An if–then decision rule is designed and the original multi-stage problem is thus transformed into a master problem and a multi-period sub-problem. As the sub-problem contains non-binding constraints, we combine a stochastic approximation algorithm with a branch-and-cut technique so that the sub-problem can be further decomposed across scenarios and be solved efficiently. The proposed decision rule–based method is also extended to solving the MCEP with fixed costs. Numerical studies in this article illustrate that the proposed method affords not only improved performance relative to an inflexible design taken as benchmark but also time savings relative to approximate dynamic programming analysis.
Date Issued
2018-01-18
Date Acceptance
2017-12-24
Citation
IISE Transactions, 2018, 50 (7), pp.553-569
ISSN
2472-5854
Publisher
Taylor and Francis Ltd.
Start Page
553
End Page
569
Journal / Book Title
IISE Transactions
Volume
50
Issue
7
Copyright Statement
© 2018 IISE.
Identifier
http://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000432174900001&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=1ba7043ffcc86c417c072aa74d649202
Subjects
Science & Technology
Technology
Engineering, Industrial
Operations Research & Management Science
Engineering
Capacity expansion problem
multi-facility system
flexibility
real options
stochastic programming
decision rule
STOCHASTIC INTEGER PROGRAMS
REAL OPTIONS
UNCERTAINTY
DECOMPOSITION
INVESTMENT
ALGORITHM
DEMAND
MODELS
Publication Status
Published
Date Publish Online
2018-01-18