ABSTRACT
This chapter examines the problem of determining a project selection schedule and a production-distribution-inventory-import schedule for each plant so as to meet the demands of multiregional markets at minimum discounted total cost during a discrete finite planning horizon. It reviews the capacity planning models and their solution techniques and presents the problem formulation. The chapter introduces the Lagrangean relaxation problem, the problem reduction algorithm using network flow properties, and the strengthened problem with a surrogate constraint. Capacity planning of a manufacturing plant is the adjustment of its production capability. Especially capacity expansion is the addition of production facilities to satisfy growing demands with minimum present worth cost. The basic problem for each plant is to choose a subset of capacity expansion projects at each time period to satisfy the demands during a discrete finite planning horizon. Through problem reduction, the mixed-integer program is easily reduced to a trivial pure integer program.
