Capacity investment decision by Monte Carlo approach in a cooperation network

Abstract

This paper proposes a Monte Carlo approach to make the capacity investment decision. The environment concerns the capacity expansion issue for independent plants operating in a collaborative network. The plants that compose the network can share capacity through a negotiation protocol in order to balance under and over utilisation due to the customer demand. The plants apply the capacity expansion process following a periodic review policy. The generic plant makes the decision using a Monte Carlo approach that takes into account the information of the plant and the information of the collaboration with the plants of the network. The Monte Carlo simulator provides the information to each plant to support the capacity investment decision. The proposed approach is compared with a case characterised by information sharing among the plants proposed in literature and a case without information sharing. A simulation environment based on the JAVA package has been developed in order to test the approach in several market conditions. Several customer demand scenarios have been tested. The simulation results highlight these main findings: the robustness of the proposed approach; the reduction of the capacity investment keeping the same level of total profit performance; and the higher utilisation of the cooperation with the other plants of the network.

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