Location, capacity expansion and production planning in pharmaceutical industry under stochastic demand

Capacity expansion problems under deterministic and stochastic demand have been studied in literature. However only a small portion of this work directly addresses the issues faced by the pharmaceutical industry. In this work we consider the location, capacity expansion and production planning problem in a pharmaceutical industry. The demand is considered to be stochastic and modeled using a scenario approach. We consider the simultaneous use of fixed and flexible facilities in this research. We model the problem as a MILP. To address industrial dimensioned problems we develop a solution methodology based on Lagrangean Relaxation. The master MILP is divided into three sub problems, where the first two sub problems deal with the strategic decisions associated with the location of fixed and flexible facilities while the third sub problem considers the tactical decisions considering the stochastic demand.