Abstract
Recently, investment planning has become very complicated due to rapid changes in the environment external to the company. In particular, short product and technological life cycles result in uncertainty in product mixes, and the evolution of new technologies makes it very difficult for a manager to decide on the size of a facility and the type of technology. This paper describes a model for technology acquisition to determine the technology and the size of investment in the face of uncertainties in product and technological evolution, and products life cycles. Uncertainty in product mixes results from stochastic product stream and overlapping of life cycles, whereas uncertainty in the acceptable choices of technologies results from uncertainty in product mix and technological evolution. This paper introduces a measurement of diversity to represent the complexity of the market environment in order to justify the level of technology. The level of technology is measured by the systems flexibility, where flexibility is the responsiveness of a facility to a diverse environment. A decision model based on a semi-Markov process has been developed. The processes of new product evolution and new technological evolution have been modeled as semi-Markov chains. Based on some hypotheses related to product and technological evolution, this paper derives a possible set of acceptable technologies. Furthermore, several results reflecting the insights of the solution are revealed and discussed. When applied, these insights reduce the state space. Finally the model is implemented on a moderate size problem and the sensitivities of the solution to certain important parameters are discussed.
