ABSTRACT
This chapter considers issues related to technology choice and expansion decisions in an environment characterized by uncertain demands. It provides a model-based approach to address tradeoffs between flexible and dedicated technologies in the presence of scale economies. The chapter develops an effective method of obtaining an approximate solution for the resulting model in order to determine the appropriate technology mix. It describes the capacity planning problem and presents a stochastic investment model. The chapter deals with the analysis of a subproblem that forms the basis for solution procedure. It focuses on concave cost functions that capture several types of scale economies. The chapter considers a technology choice problem faced by a firm manufacturing a number of products grouped into two-product families. It deals with the choice of technology and additions of capacity to satisfy the prescribed service levels. The chapter assumes that there is only one opportunity for investment which is made at the beginning of a planning horizon.
