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- Title
INVENTORY PROCUREMENT UNDER STOCHASTIC PRICES AN OPERATIONAL POLICY.
- Authors
Güzel, Ali
- Abstract
This paper is an extension of our previous work "Optimal Commodity Procurement Under Stochastic Prices" published in this journal. In that article, we presented a new mode of analysis to inventory management systems when the unit-purchasing cost is allowed to be a general stochastic process. We now develop an heuristic policy based on computationally efficient bounds of the optimal cost function. A case study shows that the heuristic policy derived with our model saved approximately 25% of the maximum potential savings - the difference between the total inventory cost of forward buying when all the future prices are perfectly known and that of no forward buying. Our results are intuitive and provide managerial insights for purchasing in a stochastic environment by showing the savings achievable when the nature of the unit cost is explicitly considered in procurement decisions.
- Subjects
INVENTORY theory; PRICES; COMMERCIAL products; INVENTORY management systems; HEURISTIC; COST; SAVINGS; INVENTORY accounting; PURCHASING
- Publication
Teknoloji, 2004, Vol 7, Issue 1, p61
- ISSN
1302-0056
- Publication type
Article