E-Procurement and Purchase Algorithm for Supply Chain Management

Abstract

A technique is developed for use in supply-chain management that assists the decision-making process for purchases of direct goods. Based on projections for future prices and demand, Request for quotes are constructed and quotes are accepted that optimize the level of inventory each day, while minimizing total cost. The problem is modeled as a Markov decision process, which allows for the computation of the utility of actions to be based on the utilities of consequential future states. Dynamic programming is then used to determine the optimal quote requests and accepts at each state in Markov Decision Process. A mathematical algorithm for purchasing can also be developed which is suitable for manufacturing companies to solve the supply chain management problems.