An Optimal Strategy for Maintaining Excess Capacity

Gaur, Daya (1998) An Optimal Strategy for Maintaining Excess Capacity. Canadian Industrial Problem Solving Workshops > 2nd IPSW [Calgary 1/6/1998 - 5/6/1998].

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Abstract/Summary

Boeing is a manufacturing industry with very low production volumes of very large units. As such, they experience huge fluctuations in demand. A standard inventory model dictates massive changes in production capacity as demand varies. However all such models assume a continuous production stream. In this report we investigate the following question whether such a model is sensible in a problem of such large scale granularity. We describe a combination of stochastic, financial and simulation models to model the production of airplanes. A preliminary simulation of the model is also presented.

Item Type:	Study Group Report
Study Group:	Canadian Industrial Problem Solving Workshops > 2nd IPSW [Calgary 1/6/1998 - 5/6/1998]
Company Name:	Boeing Corporation
Industrial Sector:	Transport and Automotive Aerospace and defence Finance
Additional Contributors:	Ales, Yanez and Amarie, Andreea and Anderies, John and Bart, Brad and Chertok, Daniel and Gupta, Arvind and Kwok, Kelly and Liu, Jian and Orasch, Markus and Robel, Greg and Sick, Gordon and Simchi, Mohammadreza and Timourian, James and Tse, Ryan
ID Code:	120
Deposited By:	Richard Booth
Deposited On:	24 January 2008

Problem Statement

Year to year, there are wide fluctuations in the demand of airplane orders at Boeing. This causes massive lay-offs and hirings which has very high cost. The problem is to devise a financial strategy to deal with these fluctuations so as to maximize the long term profit of the company.

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