Plant Layout under Discounted Sequential Machinery Investment using Dynamic Programming Approach

Abstract

Dynamic programming is employed in this study to develop a model that helps entrepreneurs to populate pre-planned plant layout using discounted sequential machinery investment method. The approach enables the use of little initial capital to sequentially invest in the most important machinery/machineries and factory and office space(s) as well as to provide sufficient working capital required by the industry to keep the plant working optimally per period. In addition, it takes into consideration the time value of money that may arise from inflation on the economy during the sequential investment period using discounting method. Using the developed model and a set of decision rules that was setup, total earnings obtained from previous periods are subsequently re-invested each period, while ensuring adequate working capital, until all the planned machines and factory and office buildings have been fully put in place. The model developed was implemented through a software named DYNAPLANT2015 which was developed using C# programming language to facilitate the solution procedure. An appropriate case study was used to evaluate the model and observe possible difference between the undiscounted and discounted sequential machinery investment