A Planning Model for Industrial Development by Using Integer Programming

Abstract

We propose one static and two dynamic industrial developmental planning models for choosing the strategic areas and for determining the associated scale of development over a multiperiod planning horizon. The criterion of those models is to minimize the present worth of the total cost required for a series of developmental programs, which must satisfy the given demand for development in the regions as a whole with respect to each planning period. We assume that the total cost function can be well specified as a step function of the scale. This way of treatment can be justified by taking account of the data availability and the existence of thresholds. Emphasis of this study is put on the formulation of three various models in the form of O-1 Integer Programming, referring to their methods for solution and their sensitivity analysis. In most cases where we can break down the project into several parts and fulfill them in a series of stages, some additional cost accrues as compared with their joint fulfillment. The second model applies to the case where this additional cost, which we call “Set-up cost”, is so small as to be negligible. The third model is devised for cases where the set-up cost stemming from the atagewise fulfillment will not be negligible. Thus the third model is the most general model among the proposed three models in this paper.