Application of multi-dimensional procurement auction in single-period inventory models

Pooya Farahvash () and Tayfur Altiok ()

Annals of Operations Research, 2008, vol. 164, issue 1, 229-251

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. Copyright Springer Science+Business Media, LLC 2008

Keywords: Reverse auction; Inventory; Multi-attribute decision making; Multi-dimensional bid; Simulation (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (3)

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DOI: 10.1007/s10479-008-0445-8

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