A scenario approach for a capacity planning problem with stochastic demands

A scenario-based approach to solving a multiproduct and stochastic capacity-planning problem is presented. This approach is a flexible management tool for strategic decision-makers to optimise, over a given planning horizon, and under uncertain demand, capacity-planning strategies. It is applicable in situations where different products can be produced, stored, and distributed to different sites having flexible capacities, and with multiple technological choices. It works by attempting to strike a compromise between profit and risk, and by analysing a set of feasible strategies, derived under specific demand scenarios, using the notion of confidence intervals.