Skip to main content
SpringerLink
Log in

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

  • Original Article
  • Published:
Mathematical Methods of Operations Research Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Bertsekas DP (1987) Dynamic programming: deterministic and stochastic models. Prentice-Hall, Englewood Cliffs, USA

    MATH  Google Scholar 

  • Bassok Y, Anupindi R (1997) Analysis of supply contracts with minimum total minimum commitments. IIE Trans 29:373–381

    Google Scholar 

  • Chen F, Krass D (2001) Analysis of supply contracts with minimum total order quantity commitments and non-stationary demands. Eur J Oper Res 131:309–323

    Article  MATH  MathSciNet  Google Scholar 

  • Cohen M, Agrawal N (1999) An anaytical comparison of long and short contracts. IIE Trans 31:783–796

    Google Scholar 

  • Fujiwara O, Sedarage D (1997) An optimal (Q,r) policy for a multicomponent assembly system under stochastic component procurement lead times. Eur J Oper Res 100:550–556

    Article  MATH  Google Scholar 

  • Gerchak Y, Yunzeng W, Yano CA (1994) Lot sizing in assembly systems with random component yields. IIE Trans 26:19–24

    Article  Google Scholar 

  • Glasserman P, Yao D (1994) Monotone optimal control of permutable GSMPs. Math Oper Res 19:449–476

    MATH  MathSciNet  Google Scholar 

  • Gurnani H, Akella R, Lehoczky J (1996) Optimal order policies in assembly systems with random demand and supply delivery. IIE Trans 28:865–878

    Google Scholar 

  • Gurnani H, Akella R, Lehoczky J (2000) Supply managment in assembly systems with random yield and random demand. IIE Trans 32:701–714

    Google Scholar 

  • Ha AY (1997) Optimal dynamic scheduling policy for a make-to-stock production system. Oper Res 45:42–53

    MATH  Google Scholar 

  • Kim E, Van Oyen MP (1998) Beyond the cμ rule: dynamic scheduling of a two-class loss queue. Math Methods Oper Res 48:17–36

    Article  MATH  MathSciNet  Google Scholar 

  • Kim E, Van Oyen MP (2000) Finite-capacity multi-class production scheduling with set-up times. IIE Trans 32:807–818

    Google Scholar 

  • Kumar A (1989) Component inventory costs in an assembly problem with uncertain supplier lead-times. IIE Trans 21:112–121

    Article  Google Scholar 

  • Li C, Kouvelis P (1999) Flexible and risk-sharing supply contracts under proce uncertainty. Manag Sci 45:1378–1398

    Article  Google Scholar 

  • Lippman S (1975) Applying a new device in the optimization of exponential queueing systems. Oper Res 23:687–710

    Article  MATH  MathSciNet  Google Scholar 

  • Porteus E (1982) Conditions for characterizing the structure of optimal strategies in infinite-horizon dynamic programs. J Optim Theory Appl 36:419–432

    Article  MATH  MathSciNet  Google Scholar 

  • Powell S, Pyke D (1998) Buffering unbalanced assembly systems. IIE Trans 30:55–65

    Article  Google Scholar 

  • Serel D, Dada M, Moskowitz H (2001) Sourcing decisions with capacity reservation contracts. Eur J Oper Res 131:635–648

    Article  MATH  Google Scholar 

  • Suk JB, Cassandras CG (1991) Optimal scheduling of two competing queues with blocking. IEEE Trans Automat Control 36:1086–1091

    Article  MATH  MathSciNet  Google Scholar 

  • Topkis DM (1978) Minimizing a submodular function on a lattice. Oper Res 26:305–321

    MATH  MathSciNet  Google Scholar 

  • Veatch M, Wein L (1992) Monotonic control of queueing networks. Queueing Syst: Theory and Appl 12:391–408

    Article  MathSciNet  MATH  Google Scholar 

  • Yano CA (1987) Stochastic leadtimes in two-level assembly systems. IIE Trans 19:371–378

    Article  Google Scholar 

  • Yao DD (1988) Optimal run quantities for an assembly system with random yields. IIE Trans 20:399–403

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. College of Business Administration, Ewha Womans University, 11-1 Daehyun-dong, Seodaemun-gu, Seoul, 120-750, Korea

    Eungab Kim

  2. Department of Industrial Engineering, Seoul National University, San 56-1, Silim-dong, Gwanak-gu, Seoul, 151-742, Korea

    Kaphoon Lee & Suk-Ho Kang

Authors
  1. Eungab Kim
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Kaphoon Lee
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Suk-Ho Kang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Eungab Kim.

Additional information

This material is based upon work supported by the Korea Science and Engineering Foundation (KOSEF) through the Northeast Asia e-Logistics Research Center at University of Incheon.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Kim, E., Lee, K. & Kang, SH. Optimal purchasing policy in a two-component assembly system with different purchasing contracts for each component. Math Meth Oper Res 63, 301–327 (2006). https://doi.org/10.1007/s00186-005-0004-x

Download citation

  • Received:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00186-005-0004-x

Keywords

Search

Navigation