FLEXIBLE AUTOMATION INVESTMENTS - A PROBLEM FORMULATION AND SOLUTION PROCEDURE

In this paper, a multi-period replacement model, based on a mixed inte ger nonlinear programming formulation, is developed for flexible autom ation investments. The model takes into account the costs, benefits an d effective utilization of several types of flexibility. The decision variables pertain to the selection and optimal implementation sequence for new, CNC modules, the replacement schedule for current equipment and the aggregate production plans for transition and subsequent perio ds in the planning horizon. The objective function maximizes the prese nt worth of the cash flows over the planning horizon. A two-level, exa ct solution method is also developed, utilizing dynamic programming me thodology for the higher level sub-problem and mixed integer-linear pr ogramming for the lower level sub-problem.