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Optimal purchasing policy in a two-component assembly system with different purchasing contracts for each component
Cited 1 time in
Web of Science
Cited 3 time in Scopus
- Authors
- Issue Date
- 2006-05
- Publisher
- Springer Verlag
- Citation
- Math Meth Oper Res 63: 301-327
- Keywords
- Purchasing policy ; Assembly ; Supply contract ; Markov decision processes ; Sensitivity 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 firms 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
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