Two-stage simulation optimization for agile manufacturing capacity planning

Alberto Marquez Uribe, Jeffery K. Cochran, Dan Shunk

Research output: Contribution to journalArticlepeer-review

33 Scopus citations


Capacity planning involves the selection of manufacturing technologies and the allocation of budget to specific equipment acquisitions. In today's highly volatile manufacturing world, an agile capacity-planning tool is required. This tool must provide the mechanism for a company to thrive in an environment of uncertainty. Uncertain future demands make capacity planning and technology selection difficult tasks, whether they are caused by variations in forecasts of direct demand or by upstream variability in a supply chain. In this paper, a practical modelling technique for minimizing the required investment in capacity planning for discrete manufacturing sites under an uncertain demand stream is presented. The method consists of a two-stage stochastic integer program. The first stage characterizes the optimal response of the system under uncertainty. The second stage selects a tool set based on the characterization from the first stage, with the addition of budget constraints. The model is scalable, allowing for multiple products, multiple operations, multiple flow paths including re-entrant flow, and multiple tool types. A simple example is introduced to explain the methodology, followed by the results of a large-scale real-world application in the semiconductor industry.

Original languageEnglish (US)
Pages (from-to)1181-1197
Number of pages17
JournalInternational Journal of Production Research
Issue number6
StatePublished - Apr 15 2003

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering


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