Dynamic Simulation Model of Demand Forecasting and Capacity Planning

This paper has developed a set of models for demand forecasting and capacity planning based on optimistic and pessimistic projections. These projections have been developed by utilizing structure and parameter scenarios. A system dynamics framework is used to model and to generate scenarios because of their capability of representing physical and information flows to understand the nonlinear dynamics behavior. It was found that construction, GDP, and investment growths have a significant contribution to the demand growth. From the scenario models we noted that if the demand growth rate is projected at around 7% annually and without capacity expansion, there would be capacity shortage starting from 2011. With capacity expansion at around 5 million tonnes and under favorable economic condition, it will meet the future demand until 2017. Meanwhile based on pessimistic projection, with capacity expansion, the firm’s might always satisfy the market demand at least until 2020.