The structure of the optimal combined sourcing policy using capacity reservation and spot market with price uncertainty

Karl Inderfurth () and Peter Kelle ()
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Karl Inderfurth: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg
Peter Kelle: Faculty of Economics and Management, Otto-von-Guericke University Magdeburg

No 9002, FEMM Working Papers from Otto-von-Guericke University Magdeburg, Faculty of Economics and Management

Abstract: This contribution focuses on the cost-effective management of the combined use of two procurement options: the short-term option is given by a spot-market with random price, whereas the long-term alternative is characterized by a multi period capacity reservation contract with fixed purchase price, reservation level and capacity reservation cost. Considering a multiperiod problem with stochastic demand, the structure of the optimal combined purchasing policy is derived using stochastic dynamic programming.

Keywords: Capacity reservation; spot market; purchasing policy; supply contracts; stochastic inventory control (search for similar items in EconPapers)
Pages: 12 pages
Date: 2009-01
New Economics Papers: this item is included in nep-mic
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Citations: View citations in EconPapers (1)

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