The Multi-Region Dynamic Capacity Expansion Problem - I

We consider the problem of determining a schedule of capacity expansions for m producing regions and a schedule of shipments from the regions to n markets so as to meet the market demands over a T-period planning horizon at minimum discounted capacity expansion and shipment costs. Both these costs are assumed to be proportional to the amounts involved. The heuristic algorithm of this paper improves on feasible solutions by exchange of capacities between any pair of regions. The algorithm imbeds an optimization procedure to seek the best feasible solution in the direction specified by the heuristic. Computational results for both real and randomly generated problems show that the heuristic algorithm is computationally efficient and yields close to optimum solutions.