Campus Units
Industrial and Manufacturing Systems Engineering
Document Type
Article
Publication Version
Submitted Manuscript
Publication Date
2003
Journal or Book Title
Computers & Operations Research
Volume
30
Issue
10
First Page
1525
Last Page
1537
DOI
10.1016/S0305-0548(02)00081-3
Abstract
We study a loss system to forecast the demand for capacity based on the forecast demand for service and a specified service level. A little-used property of the Erlang loss formula allows the linear transformation of demand for service into demand for capacity. Next, given the forecast demand for capacity, we approximate a long-run optimal capacity expansion policy by optimizing over successively longer finite time horizons. Analytical formulas together with regression analysis show the significance of the number of potential customers, frequency and duration of their requests for service, and the specified service level on the demand for capacity. Numerical sensitivity analysis exposes the effects of cost parameters, the demand growth rate and the required rate of return on the optimal time intervals between expansions.
Copyright Owner
The Authors
Copyright Date
2003
Language
en
File Format
application/pdf
Recommended Citation
Simampo, Alexander and Ryan, Sarah M., "Capacity expansion for a loss system with exponential demand growth" (2003). Industrial and Manufacturing Systems Engineering Publications. 130.
https://lib.dr.iastate.edu/imse_pubs/130
Comments
This is a manuscript of an article that is published as, Simampo, A. and S. M. Ryan, "Capacity Expansion for a Loss System with Exponential Demand Growth," Computers and Operations Research, 30, 1525-1537 (2003). Available at: https://doi.org/10.1016/S0305-0548(02)00081-3. Posted with permission.