Use of Monte Carlo Modified Markov Chains in Capacity Planning

Abstract

AbstractThe purpose of the paper is to demonstrate the use of Monte Carlo modified Markov chains in capacity planning. After a brief review of available literature on the subject of Monte Carlo simulations and Markov chains, the benefits of this method are illustrated on a practical example, where demand as well as the machine availability is dictated by Markov chains. Monte Carlo simulations are used to provide an additional view on the problem. Conclusions are presented in a well arranged manner, using graphs as the main output. These graphs provide the perfect wake up call for upper management since they clearly show lost profits due to ineffectiveness within the model. A sensitivity analysis is also performed in order to determine the variables that affect the model the most