Application of multi-dimensional procurement auction in single-period inventory models |
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Authors: | Pooya Farahvash Tayfur Altiok |
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Institution: | (1) CIT Group Inc., Livingston, NJ 07039, USA;(2) Department of Industrial and Systems Engineering, Rutgers University, Piscataway, NJ 08854, USA |
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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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Keywords: | Reverse auction Inventory Multi-attribute decision making Multi-dimensional bid Simulation |
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