AbstractsBusiness Management & Administration

Long Term Capacity Planning (LTCP) consists of deciding the type and amount of capacity of production systems for multiple periods in a long term planning horizon. It involves decisions related to strategic planning, such as buying or selling of production technology, outsourcing, and making tactical decisions regarding capacity level and configuration. Making these kinds of decisions correctly is highly important for three reasons. Firstly, they usually involve a high investment; secondly, once a decision like this is taken, it cannot be changed easily (i.e. they are highly irreversible); thirdly, they affect the performance of the entire system and the decisions that will be possible at a tactical level. If capacity is suboptimal, there will be lost demand (in the present and possibly in the future); if the system is oversized, there will be unused resources, which may represent an economical loss. Long term decisions are typically solved with non-formalized procedures, such as generating and comparing solutions, which do not guarantee an optimal solution. In addition, the characteristics of the long term capacity planning problem make the problem very difficult to solve, especially in cases in which products have a short life cycle. One of the most relevant characteristics is the uncertainty inherent to strategic problems. In this case, uncertainty affects parameters such as demand, product life cycle, available production technology and the economic parameters involved (e.g. prices, costs, bank interests, etc.). Selection of production technology depends on the products being offered by the company, along with factors such as costs and productivity. When a product is renewed, the production technology may not be capable of producing it; or, if it can, the productivity and/or the quality may be poor. Furthermore, renewing a product will affect its demand (cannibalization), as well as the demand and value of the old products. Hence, it is very important to accurately decide the correct time for product renewal. This thesis aims to design a model for solving a long term capacity planning problem with the following main characteristics: (1) short-life cycle products and their renewal, with demand interactions (complementary and competitive products) considered; (2) different capacity options (such as acquisition, renewal, updating, outsourcing and reducing); and (3) tactical decisions (including integration strategic and tactical decisions).