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Optimal purchasing policy in a two-component assembly system with different purchasing contracts for each component

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Authors
Kim, Eungab; Lee, Kaphoon; Kang, Suk-Ho
Issue Date
2006-05
Publisher
Springer Verlag
Citation
Math Meth Oper Res 63: 301-327
Keywords
Purchasing policyAssemblySupply contractMarkov decision processesSensitivity analysis
Abstract
This paper considers an assembly system where a firm produces a single
product which is assembled using two types of components (component 1 and
component 2). The components are provided by individual suppliers (supplier 1
and supplier 2). We assume that the firm makes different procurement contracts
with supplier 1 and supplier 2. To supplier 1, the firm specifies the maximum inventory
level of component 1 and makes a commitment to purchase the component
as long as its inventory level is below this target level. To supplier 2, the firm
has the option of purchasing or rejecting component 2 at each instant supplier 2
provides it. Formulating our model as a Markov decision problem, we identify a
component 2 purchasing policy which maximizes the firm’s profits subject to the
costs of rejecting component 1, holding component 2, and purchasing component
2.We also investigate how the changes in the sales price and cost parameters affect
the optimal purchasing policy. Finally, we present numerical study for the optimal
performance evaluation.
ISSN
1432-2994 (print)
1432-5217 (online)
Language
English
URI
http://hdl.handle.net/10371/7543
DOI
https://doi.org/10.1007/s00186-005-0004-x
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College of Engineering/Engineering Practice School (공과대학/대학원)Dept. of Industrial Engineering (산업공학과)Journal Papers (저널논문_산업공학과)
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