A stochastic programming model for strategic capacity planning in thin film transistor-liquid crystal display (TFT-LCD) industry

This paper studies strategic capacity planning problems under demand uncertainties in thin film transistor-liquid crystal display (TFT-LCD) industry. Due to the following trends, capacity planning has become a critical strategic issue in TFT-LCD industry: (1) complex product hierarchy and product types caused by a wide range of product applications; (2) coexistence of multiple generation of manufacturing technologies in a multi-site production system; and (3) rapid growing and changing market demand derived by the needs for replacing traditional cathode ray tube (CRT) display. Furthermore, demand forecasts are usually inaccurate and vary rapidly over time.Our research objective is to seek a capacity allocation and expansion policy that is robust to demand uncertainties. We consider special characteristics of TFT-LCD manufacturing systems such as demand uncertainties, limited configuration flexibility, and cutting ratios. This paper proposes a scenario-based two-stage stochastic programming model for strategic capacity planning under demand uncertainties. Comparing to the deterministic approach, our stochastic model significantly improve system robustness under demand uncertainties.