Joint decision of procurement lot-size,supplier selection,and carrier selection

The joint decision making of procurement lot-size, supplier selection, and carrier selection has potential to reduce buyer's purchasing expenditures. Furthermore, the total logistics cost can also come down through economies of scale in the purchasing and transportation costs, and reduction in supply chain disruptions such as rejections and late deliveries. We study a procurement setting in which a buyer needs to purchase a single product from a set of suppliers over finite discrete time periods to satisfy service level requirements. The suppliers offer all-unit quantity discounts, and transportation cost depends on carrier capacity as well as geographical location of suppliers. This paper proposes an integer linear programming model to simultaneously determine the timings of procurement, lot-sizes, suppliers and carriers to be chosen so as to incur the least total cost over the planning horizon. A numerical example is included to demonstrate the effectiveness of the proposed model in establishing tradeoffs among purchasing cost, transaction cost, and inventory holding cost. Sensitivity analysis has been carried out to understand the effects of the model parameters on the purchasing decisions and total cost. Managerial insights of this study serve as a reference for decision makers to develop effective procurement strategies.     

The Impact of Consumption Hassle on Pricing Schedules

A curious phenomenon in the retail pricing of many product categories (e.g., tuna, frozen orange juice, and tomato paste) is the existence of quantity surcharges. A related curiosity is the existence of both discounts and surcharges within the same product category. To explain the former phenomenon, extant research invokes heterogeneity in consumption parameters, heterogeneity in search costs, or concern for retail price image. To the best of our knowledge, there is no received explanation for the latter phenomenon. We add to this rich stream of work by proposing a novel explanation for quantity surcharges. Our explanation is based on the notion of consumption hassle. We analyze a market that is heterogeneous in a hedonic parameter that influences valuations as well as the effective cost of the consumption hassle. We then derive consumer choices (small pack, large pack, or two small packs) taking into account Individual Rationality (IR) and Incentive Compatibility (IC) constraints. In the absence of consumption hassle, we obtain two segments with one purchasing the small pack and the other purchasing the large pack. Moreover, the optimal pricing for the seller involves quantity discounts. However, with the introduction of consumption hassle, the market potentially splits into three segments: one purchasing the small pack, another purchasing two small packs, and the third purchasing the large pack. Moreover, the optimal pricing for the seller involves quantity surcharges. Overall, our analytical findings offer an additional explanation for the phenomenon of quantity surcharges. More importantly, they offer a rationale for the existence of multiple pricing schedules within the same product category by explicitly recognizing variations in consumption hassle. Copyright © 2012 John Wiley & Sons, Ltd.     

An optimal inventory model where resupply is possible but uncertain

A model is formulated for computing the optimal stock quantity of an item when resupply is possible but uncertain. The distinguishing feature of the model is that the optimal stock quantity calculation takes into account the cost of resupply and the probability of stock arriving by a specified mode of transport in time for issue to customers. The model is then applied to the problem of determining a preferred mode of transport for an assumed set of parameters.     

Implementing organizational change in supply towards decentralization

This paper presents the findings from research in large companies investigating implementation issues faced by chief purchasing officers as their supply organization changed to greater decentralization. Once the decision was made to decentralize, responsibility for implementation was given to the chief purchasing officer (CPO). Firms changing their supply organization to a more decentralized structure faced a number of implementation issues, including the business unit concerns, role of the chief purchasing officer, top management involvement, changes to existing purchasing staff and the involvement of consultants. In the nine changes studied across seven companies, the decentralization process also required the CPO to address a number of simultaneous activities, including cost reduction objectives and implementation of information technology systems. A surprising “purchasing paradox” was also uncovered as top management still expected decentralized supply units to provide additional savings.     

Low cost country sourcing and its effects on the total cost of ownership structure for a medical devices manufacturer

In this paper, we describe a total cost of ownership (TCO) method as an activity-based costing (ABC) application along the value chain to measure and analyse the costs of international sourcing activities. We further describe the method's implementation for a manufacturer of high-tech medical devices. For this case study, we analyse the effects of shifting purchasing volume from traditional procurement market suppliers to low cost country suppliers on the cost structure of purchasing projects. We find that particularly costs at component and supplier level gain importance over traditionally dominating unit level costs. Furthermore, we identify low cost country sourcing as a decision with extensive impact on value chain entities other than purchasing. Finally, a considerable part of costs in low cost country sourcing accrue at the beginning of a purchasing project due to problems stemming from unsatisfactory initial quality, language barriers and intercultural communication.     

How to achieve cost savings and strategic performance in purchasing simultaneously: A knowledge-based view

The competitive advantage purchasing provides has been debated for decades. For a novel perspective we derive a theoretical framework grounded in the knowledge-based view in order to examine how purchasing knowledge and purchasing integration impact cost and strategic performance. The derived hypotheses are tested based on extensive secondary data from a large European multinational utility company. The 179 studied ‘purchasing-internal client relationships’ contain real contracted savings data and internal client ratings of purchasing knowledge, purchasing integration and strategic purchasing performance. We show that purchasing knowledge is a major antecedent for both savings and strategic purchasing performance. This effect is further amplified by purchasing integration. With this study, we extend the understanding of the purchasing knowledge–performance link. We conclude that purchasing knowledge becomes particularly valuable when combined with other functions' processes through purchasing integration. This causal chain is also supported through general knowledge-based view theory. Moreover, we provide numerical evidence of the value of knowledge creation and integration processes to purchasing professionals in our managerial implications based on results obtained from actual purchasing savings data.     

钢铁企业三类含铁物料的协同采购研究

钢铁企业生产中,需要三种含铁物料精矿粉、富矿粉和块矿。以降低含铁物料采购成本为目标,建立了基于性能和价格的含铁物料采购模型。模型主要约束包括：铁量约束,各类含铁物料用量约束,高炉碱度约束,以及采购数量约束。数值模拟中要求含铁物料含铁量应该满足企业铁产量要求,各类含铁物料采购量控制在基准期钢铁企业实际采购量的5%以内,高炉碱度约束转化为基准期CaO,MgO,SiO2的数量约束。通过实际月度数据的模拟计算,能够为企业降低采购成本23.3万元,取得了明显经济效益。     

Organizational design in public procurement: A stakeholder approach

Organizing the purchasing function for public bodies and other non-profit and/or non-market bodies starts with the selection of an appropriate organizational strategy. In order to be able to select between generic strategies like low cost and differentiator or strategies described as operational excellence, customer intimacy and product leadership, a stakeholder based model was used. The selected strategy forms the basis to design the nature of three organizational elements: policies (P), organization (O) and processes (P). The aspect system of the purchasing function and the sub-system of the purchasing department reflect the nature of these three POP elements. It helps to translate the selected organizational strategy into a appropriate supplier strategy and clarifies the idealized mix of suppliers in terms of portfolio archetypes. Ten policy aspects of purchasing and four organizational aspects are described to redesign purchasing.     

Cost and productivity

This study develops an analytical model capable of decomposing both intertemporal and multilateral cost variation. It begins by attributing cost variation to a price effect and a quantity effect. Then the quantity effect is decomposed into a productivity effect and an activity effect. The productivity effect in turn decomposes into a cost efficiency effect and, in the intertemporal context, a technical change effect. This paper also shows how the intertemporal and multilateral cost decompositions can be implemented, using linear programming techniques. These techniques offer certain advantages over conventional econometric techniques whenever a substantial portion of cost variation is due to variation in cost efficiency. The two cost decompositions are illustrated with a pair of benchmarking exercises based on a panel of 93 US electric power generating companies, in which variation in cost efficiency does play a key role. Copyright © 2000 John Wiley & Sons, Ltd.     

The impact of purchasing strategy-structure (mis)fit on purchasing cost and innovation performance

The organizational design literature strongly supports the notion of “structure follows strategy”, and suggests that a misfit between the two has a negative effect on performance. Building on this line of argument, we examine to what extent the (mis)fit between purchasing strategy and purchasing structure impacts purchasing performance. We focus on cost and innovation purchase category strategies, and examine how the deviation from an ideal purchasing structure defined along three dimensions (centralization, formalization, and cross-functionality) impacts purchasing performance. Analysing data collected from 469 firms in ten countries, we demonstrate that a strategy-structure misfit negatively impacts purchasing performance in both cost and innovation strategies. We also find that purchasing proficiency is a mediator in this relationship between misfit and performance. Our findings aid managerial decision making by empirically validating the necessity of having the right purchasing structure for successfully executing different purchasing strategies.     

On the retention of finished goods inventory when reorder-occurrence is uncertain

Finished goods inventory may accumulate for a variety of reasons in the production of lowdemand or slow-moving items. In this article a simple model is developed and some results are presented to aid in making inventory retention decisions when there exists uncertainty about whether reorders for a slow-moving item will be received in the future. In formulating the model, it is assumed that some excess inventory remains after filling a customer order and that a single reorder for the item is possible. The problem is to determine how long to retain the inventory before disposing of it.The relevant expected costs of retaining some quantity of inventory for a period of time consist of two types: (1) the inventory carrying cost less the salvage value from disposal; and (2) the future production cost incurred due to premature disposal. Using conventional optimization, a relationship for finding the optimal retention period is derived and conditions are identified that ensure that the optimal retention period can be obtained directly from the relationship.To determine the optimal retention period, probability distributions are required for the interarrival time until the reorder occurs and for the reorder quantity. While it seems logical to assume that each item would have its own distributions, this argument leads to a specification problem since the data needed to establish distributions for individual items will generally not be available for slow-moving items. One approach used to overcome this problem in practice is to combine data for a selected group of items and use the combined data to obtain distributions useful for any or all of the items in the group. An example illustrating this approach is provided.     

Intra-organizational legitimization strategies used by purchasing managers

This paper addresses the issue of how purchasing managers can develop the purchasing department's legitimacy within an organization. A qualitative exploratory approach based on six cases has been used since: (1) there has not yet been a research performed on this topic; and (2) an analysis of internal legitimization strategies must take into consideration the context and the nature of the relationships among departments. Our analysis shows that in order to create, maintain or increase the purchasing department's internal legitimacy, purchasing managers have to do very well about two complementary strategic orientations: (1) identify and attract the best suppliers; (2) identify and implement collaborative processes and coordination mechanisms that cannot be duplicated by competitors. In fact, supply managers actually develop legitimization strategies based internally and externally, since a higher level of internal legitimacy can also be supported partially by external stakeholders, who then influence the other departments' and top management's perceptions.Our study also shows that the strategies used by purchasing managers take different forms depending which legitimacy dimension (cognitive, pragmatic, or moral legitimacy) they are trying to influence. Moreover, a purchasing department's legitimacy strategy is developed based on a few important factors: (1) where the purchasing department stands at a given time in terms of the contribution perceived, similar to a "balance sheet" evaluation; (2) the purchasing personnel's technical and relational competencies; and (3) the extent of their implication in the strategic choices leading to the development of a competitive advantage for the organization they work for. It seems that any effort to take steps based on coherent legitimization strategies could help improve both a purchasing department's legitimacy level and its development level. From this standpoint, this study also shows that the purchasing department's internal legitimacy is a crucial driver of purchasing practices.     

Assortimentsbepaling van seizoenprodukten

This paper deals with the analysis of a problem often met when determining purchasing policies. From a number of different kinds of goods, which are to be bought, the total quantity is restricted by storing capacity or financial limits. The problem "how much of each kind will be bought" is solved for a discrete as well as for a continuous distribution of demand for the various goods.     

原料有批量折扣的生产库存模型

研究了原料价格有多种批量折扣,生产商进行批量采购,且每次生产至少采购一次;需求率与生产成本固定的条件下,生产商的最优采购策略及最优生产批量问题。模型的求解一般需要分两个阶段:首先初步求出可能的最优采购批量与可能的最优生产批量,并由此得出可能的采购次数,而后求出各采购次数条件下各采购策略下的总成本,其中令总成本最低者即为所求。给出了一个算例对模型进行了说明。     

Purchasing management consulting services—From management autonomy to purchasing involvement

The purchasing of management consulting services is a challenging area for purchasing agents to become involved in. A study of six organizations shows large variations in terms of the extent and way in which they were involved ranging from ad hoc and clerical approaches to their systematic and central participation. Based on a comparison of the cases, enablers of purchasing involvement are discussed, including the status of the purchasing function, managerial use of and attitudes towards consultants, how the management consulting service and the purchasing situation are framed, and the implementation strategy. We conclude that what are generally regarded as sound purchasing practices can also work in the case of management consultants. This, however, requires a good understanding of the consulting service in the client organization. We suggest that the traditionally marginal role of purchasing agents may be better understood as a consequence of the characteristics of the consultant–client relationship than any essential characteristics of the consulting service.     

Strategic sourcing and corporate social responsibility: Aligning a healthcare organization's strategic objectives

Strategic sourcing has long been utilized by organizations to maximize budget efficiency. The process includes a spend analysis, which historically has been performed by identifying the commodities and services purchased that resulted in the greatest spend, and establishing contracts with suppliers for these items in an effort to decrease the overall price through quantity discounts. This process restricts the data used in the spend analysis process to basic transactional information, and has not considered corporate social responsibility objectives as part of the strategic sourcing process. This paper modifies an existing spend analysis process framework, and applies the framework in a case study that uses additional data points to identify opportunities that allow an organization to simultaneously achieve both strategic purchasing and social responsibility objectives. The case study uses healthcare purchasing data from eight Department of Veterans Affairs medical centers. The goal of the model generated using regression analysis in the case study is to determine the buy characteristics that are most likely to generate mandated savings within the medical centers, in conjunction with achieving sustainability goals. The extensions of the regression model were examined to determine how collaborative buyer/supplier relationships can achieve organizational strategic objectives.     

企业物资采购与存储优化模型及应用

从如何控制企业成本,提高其竞争力的意义出发,考虑在各个时期企业对物资的需求量、采购量及存储费用的不同,提出了一种企业物资采购与存储的优化模型,并将其转化为最短路问题,利用蚁群算法对其求解。最后,利用实例验证了该模型和算法的可靠性和有效性。     

The purchasing department's leadership role in developing and maintaining a preferred customer status

Developing and maintaining a preferred customer status is one of the main objectives of organizations that want to obtain a better access to supplier's information, resources, and innovation. This paper addresses the extent and the nature of the purchasing department's leadership role in the process of developing and maintaining a preferred customer status. A qualitative exploratory approach based on eleven cases has been used in order to take into consideration the context specific to the buyer-supplier relationship in a preferred customer scenario.Our study shows that the purchasing department performs four main categories of roles: (1) identifies and selects the best supplier, (2) structures and segments the supply base, (3) builds close relationships with selected suppliers and (4) develops working relationships, using an effective communication. Each of these roles is related to three key components of the purchasing department's capabilities: boundary, relational, and coordination. These four categories of roles illustrate supply's ability to recognize and understand the specifics of the preferred customer situation. Based on our analysis, the purchasing department should be viewed as extending an organization's resource base, making the organization more competitive.Our analysis also shows that the purchasing managers' leadership is critical for the development and the coordination of activities with selected suppliers, as well as proper communication with them. Specifically, the purchasing manager's transformational leadership generates more internal user and supplier involvement through the creation and articulation of a common vision, by establishing shared goals with other organizational units, and by focusing on activities that benefit the organization; this allows to move from initiative-driven efforts to an “institutionalized preferred customer status management” in the organization.     

动态持有成本下的库存成本模型研究

对制造业企业来说,更大的生产能力就有机会带来更多的销量,所以在库存模型中需求率是与库存量正相关的变量,而并非在整个在库时间内都保持为常量。论文提出了一种库存成本与需求率分别和库存时间与库存量相关的模型,并针对两种成本结构各设计了一种优化算法以确定最优订购量和最优库存时间。     

A multimodal,multicommodity, and multiperiod planning problem for coal distribution to poor families

Tackling poverty has been one of the greatest global challenges and a prerequisite to sustainable development of countries. Countries implement nationally appropriate social protection systems and measures to address poverty. This paper addresses an aid system adopted by the government in Turkey where significant amounts of coal is distributed to poor families each year. The objective of the coal aid system is to complete the delivery of coal to poor families by the start of winter. However, an analysis of the data from previous years indicates that the distribution to many families cannot be completed on time. This results from the fact that planning is done manually and by trial-and-error as there is no system that can be used for distribution planning. This paper describes the planning problem encountered and develops a mathematical model to solve it. The proposed model is a multimodal, multicommodity, and multiperiod linear programming (LP) model. The model can be used to develop and update a distribution plan as well as to answer several what-if questions with regard to capacities, time constraints, and so forth. The model is solved using CPLEX for several problem instances obtained under different scenarios using data for the year 2012. The results show that at least 9% cost savings and about 40% decrease in distribution completion time can be achieved when the model is used. We analyze scenario results qualitatively and quantitatively and provide several insights to the decision makers. As a part of quantitative analysis, we develop regression models to predict optimal costs based on several factors. Our main contribution is to provide an efficient and effective tool to handle a large-scale real-world problem. The model has also helped to prove that the organization responsible for distribution planning may move from the current planning practice to an all-encompassing top-down approach.