A multi-period inventory model with multi-dimensional procurement bidding

Abstract

We consider a multi-period inventory model with raw material procurements carried out via a reverse auction. Bids are multi-dimensional, and they consist of supplier information of price, shortage quantity and lead time. This work is an extension of our earlier work that has focused on multi-dimensional procurement auctions in single-period inventory models, to multi-period settings. The new model is based on a hybrid approach combining stochastic dynamic programming and simulation.