Abstract
Procurement is one of the major activities in the Manufacturing Resource Planning (MRP II), which is closely coupled with inventory management. Any improvement in this area will have a direct impact on the performance of the entire supply chain. Auction mechanism can be a successful procurement method when there are several potential suppliers available. In this paper, we consider a single-period inventory model when the selection of the supplier is done through a reverse auction with bids consisting of several attributes, namely price, shortage quantity, and lead time. The multi-dimensionality of the bid increases the complexity of the underlying problem creating a need for an approach to determine an approximate optimal target level. This is needed for the initiation of the auction and the procurement process. Monte-Carlo simulation method was used to investigate the performance of the approximation. Simulation results show that the analytical method provides an acceptable approximation for the optimal target inventory level.
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Farahvash, P., Altiok, T. Application of multi-dimensional procurement auction in single-period inventory models. Ann Oper Res 164, 229–251 (2008). https://doi.org/10.1007/s10479-008-0445-8
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DOI: https://doi.org/10.1007/s10479-008-0445-8