A set covering formulation for agile capacity planning within supply chains

Capacity planning and equipment selection within modern production facilities is the balance of opposite needs: the minimization of the required investment through simple dedicated equipment, and the use of more expensive multi-functional equipment to deal with changing demand. Many times, costly equipment is required to compete due to widespread technological developments among competitors and crucial product customization requirements. This paper presents a new methodology for capacity planning of multi-functional equipment including evaluation of near-optimal solutions that may have added flexibility in meeting varying supply chain demands. Distinct equipment types that can execute similar operations are modeled in a modified set covering formulation, which is used to generate alternative equipment configurations. The formulation is an NP-complete integer program. Use of the model is demonstrated in two cases. A smaller, completely developed case study that motivated the research is presented first. Then, application of the method in the equipment selection process of a large-scale semiconductor manufacturing facility is summarized.