## 4 Design and Simulation of the Conceptual Model for Capacity Planning of an OEM Plant  
### Design of a Generic Conceptual Model Development Applying the VSM  
The VSM environment is represented by customer demand, technological change, quality standards, price, and capacity of competitors. System 5, the normative level of capacity management, determines the goals of ROI and payback standards. System 4 considers the environment and internal set-up and situation in order to make decisions to match supply capacity with customer demand. Decisions are made depending on the reactivity, i.e., the risks to be taken when making a decision, such as making an investment or adding an additional shift. System 3 determines the overall internal planning using a certain forecasting method as well as methods for demand and capacity planning. Moreover, economic parameters are consolidated here. System 2 represents the coordination of the production lines or shops within the production plant to achieve production goals. Finally, System 1 contains the entities or machine groups within a production line or a workshop. In order to support capacity management activities, these groups are viewed as machine groups that can produce the same products. In order to develop the conceptual model, the following activities were performed:  
* Development of an economic target system depending on capacity utilization of a production network, plant, line, or group of machines;
* Capacity management tasks according to planning horizon levels;* Definitions of recursion levels and operative units;
* Association of tasks to recursion levels and operative units;
* Identification of needed information flows between operative units and recursion levels. The conceptualization of capacity management based on the viable system model, and the tasks related to the five systems of the viable system model are shown in Figure 1.  
In the different recursion levels, casual loop diagrams were constructed in order to identify interrelationships among factors. Moreover, the main characteristics of the conceptual model that applies the viable system model are described below and compared with the classical approach, named the nonviable system model. Demand planning: There are control limits based on statistical process control principles, such as the time series in quality control charts and hypothesis tests that are used to change a demand forecasting method to another method. The classical approach uses one method (simple moving average) to forecast customer demand, while the VSM simulation model can change between two forecasting models (simple linear regression and cumulative moving average) depending on the pattern of the demand. Moreover, the VSM simulation model is able to detect outliers, forecast sporadic trends, extend the moving average, and detect seasonal demands. * The focus of demand forecasting is not to bring about a difference between the models in terms of the accuracy of the used forecast methods, but to be able to respond to the changes in customers' demands by detecting the pattern changes as soon as possible. Due to this premise, the model includes factors that allow for controlling the values that trigger the forecasting changes. Therefore, it is a fight between \"detecting only the changes that are real changes\" (but perhaps not before they have a negative impact on production and sales parameters) or \"detecting more changes than the real ones but knowing that, if there is a change, it is going to be anticipated\" (but knowing that, if a change is not a real one, the system will have more forecast failures at first). Figure 1: Recursion levels of the conceptual model and capacity management at the plant level based on the viable system model. * This viable system model deals with uncertainty in demand by calculating forecast values for each product separately. Then, the forecast for groups of customers is done by aggregation of customers' forecasts.