Procurement Problem Research Articles

Simultaneous planning of the project scheduling and material procurement problem under the presence of multiple suppliers

Simultaneous planning of project scheduling and material procurement can improve the project execution costs. Hence, the issue has been addressed here by a mixed-integer programming model. The proposed model facilitates the procurement decisions by accounting for a number of suppliers offering a distinctive discount formula from which to purchase the required materials. It is aimed at developing schedules with the best net present value regarding the obtained benefit and costs of the project execution. A genetic algorithm is applied to deal with the problem, in addition to a modified version equipped with a variable neighbourhood search. The underlying factors of the solution methods are calibrated by the Taguchi method to obtain robust solutions. The performance of the aforementioned methods is compared for different problem sizes, in which the utilized local search proved efficient. Finally, a sensitivity analysis is carried out to check the effect of inflation on the objective function value.

Optimal Descending Mechanisms for Constrained Procurement

Descending mechanisms for procurement (or, ascending mechanisms for selling) have been well‐recognized for their simplicity from the viewpoint of bidders—they require less bidder sophistication as compared to sealed‐bid mechanisms. In this study, we consider procurement under each of two types of constraints: (1) Individual/Group Capacities: limitations on the amounts that can be sourced from individual and/or subsets of suppliers, and (2) Business Rules: lower and upper bounds on the number of suppliers to source from, and on the amount that can be sourced from any single supplier. We analyze two procurement problems, one that incorporates individual/group capacities and another that incorporates business rules. In each problem, we consider a buyer who wants to procure a fixed quantity of a product from a set of suppliers, where each supplier is endowed with a privately known constant marginal cost. The buyer's objective is to minimize her total expected procurement cost. For both problems, we present descending auction mechanisms that are optimal mechanisms. We then show that these two problems belong to a larger class of mechanism design problems with constraints specified by polymatroids, for which we prove that optimal mechanisms can be implemented as descending mechanisms.

Hybrid fusion reactor for production of nuclear fuel with minimum radioactive contamination of the fuel cycle

The paper presents the results of the system research on the coordinated development of nuclear and fusion power engineering in the current century. Considering the increasing problems of resource procurement, including limited natural uranium resources, it seems reasonable to use fusion reactors as high-power neutron sources for production of nuclear fuel in a blanket. It is shown that the share of fusion sources in this structural configuration of the energy system can be relatively small. A fundamentally important aspect of this solution to the problem of closure of the fuel cycle is that recycling of highly active spent fuel can be abandoned. Radioactivity released during the recycling of the spent fuel from the hybrid reactor blanket is at least two orders of magnitude lower than during the production of the same number of fissile isotopes after the recycling of the spent fuel from a fast reactor.

Dynamic procurement management by reverse auctions with fixed setup costs and sales levers

In this paper, we study a dynamic procurement problem for a retailer with fixed setup costs and sales levers (such as pricing, advertising, etc.). The retailer runs a reverse auction with a procurement contract in each period. A number of potential suppliers bid for this contract, and the winner is the supplier with the highest bid and is given the decision right for the quantity produced and delivered. The demand is either realized by selling via Internet auctions and unmet demand is lost, or is a price-sensitive nonnegative random variable and all shortages are backlogged. We show the existence of the retailer’s optimal procurement contract, under which the suppliers’ Bayesian–Nash equilibrium bidding strategy is (q(·),Q(·)), similar to the classic (s, S) policy for the retailers in dynamic inventory control problems. However, the (q(·),Q(·)) strategy here is for the suppliers and is realized through the suppliers’ marginal production costs and so consists of two random variables for the retailer.

Coordinating the Bidding Strategy in Multiissue Multiobject Negotiation With Single and Multiple Providers

This paper addresses the problem of flexible procurement of multiple distinct services characterized by multiple nonfunctional characteristics, i.e., quality-of-service attributes. We consider the one-to-many negotiation approach as a flexible method for procuring multiple different services by a buyer agent. We address the problem of coordinating the bidding strategy amongst multiple concurrent negotiations and propose novel dynamic negotiation strategies. The proposed strategies consider the behaviors of the opponents of the current negotiation encounter in managing the local reservation values of the common negotiation issues (attributes) of different services. Most previous works consider the problem of negotiation over a single object characterized by one or more issues. We extend our previous work and investigate a more complex situation where a buyer agent negotiates over multiple distinct services given that each service has multiple negotiation issues and multiple possible providers. The experimental results show evidence for the effectiveness and robustness of our dynamic negotiation strategies under various negotiation environments.

Optimal combined purchasing strategies for a risk-averse manufacturer under price uncertainty

Purpose: The purpose of our paper is to analyze optimal purchasing strategies when a manufacturer can buy raw materials from a long-term contract supplier and a spot market under spot price uncertainty. Design/methodology/approach: This procurement model can be solved by using dynamic programming. First, we maximize the DM’s utility of the second period, obtaining the optimal contract quantity and spot quantity for the second period. Then, maximize the DM’s utility of both periods, obtaining the optimal purchasing strategy for the first period. We use a numerical method to compare the performance level of a pure spot sourcing strategy with that of a mixed strategy. Findings: Our results show that optimal purchasing strategies vary with the trend of contract prices. If the contract price falls, the total quantity purchased in period 1 will decrease in the degree of risk aversion. If the contract price increases, the total quantity purchased in period 1 will increase in the degree of risk aversion. The relationship between the optimal contract quantity and the degree of risk aversion depends on whether the expected spot price or the contract price is larger in period 2. Finally, we compare the performance levels between a combined strategy and a spot sourcing strategy. It shows that a combined strategy is optimal for a risk-averse buyer. Originality/value: It’s challenging to deal with a two-period procurement problem with risk consideration. We have obtained results of a two-period procurement problem with two sourcing options, namely contract procurement and spot purchases. Our model incorporates the buyer’s risk aversion factor and the change of contract prices, which are not addressed in early studies.

Overcoming Obstacles To Enable Access To Medicines For Noncommunicable Diseases In Poor Countries.

The modern access-to-medicines movement grew largely out of the civil-society reaction to the HIV/AIDS pandemic three decades ago. While the movement was successful with regard to HIV/AIDS medications, the increasingly urgent challenge to address access to medicines for noncommunicable diseases has lagged behind-and, in some cases, has been forgotten. In this article we first ask what causes the access gap with respect to lifesaving essential noncommunicable disease medicines and then what can be done to close the gap. Using the example of the push for access to antiretrovirals for HIV/AIDS patients for comparison, we highlight the problems of inadequate global financing and procurement for noncommunicable disease medications, intellectual property barriers and concerns raised by the pharmaceutical industry, and challenges to building stronger civil-society organizations and a patient and humanitarian response from the bottom up to demand treatment. We provide targeted policy recommendations, specific to the public sector, the private sector, and civil society, with the goal of improving access to noncommunicable disease medications globally.

Simulating possible impacts of roundwood procurement problems in Austria on wood-based energy production and forest-based industries

Wooden biomass is the main source for energy based on biomass in Austria. Only a part of the wooden biomass for energy directly originates in forests. Other major sources include post-consumer wood and by-products of the Austrian forest-based industries. Consumption of wooden biomass has been growing much more than domestic production, forest-based industries are building up capacities in neighbouring countries, leaving less raw materials for exports to Austria than in the decades before. The authors have assessed the possible effects of a wood raw material shortage with a System-Dynamics simulation model of the Austrian forest-based sector (FOHOW). The model covers the interactions between the general economy and the forest-based sector, including wood-based energy. The simulation period ranged from 2006 to 2025. Beside a business as usual scenario, scenarios with a sawlog import reduction, a sawmill capacity reduction as well as a paper and panel capacity reduction were simulated. Probably the most notable result of the analysis is the strong impact of the sawmill industry on the fuelwood prices and availability. Despite increased fuelwood supply from forests, reduction of sawmill capacity will lead to the inability of fully meeting renewable energy policy objectives due to a shortage of sawmill residues. With exemption of the panel & paper capacity reduction scenario all other scenarios project a slight reduction of growing stock until 2025. But after decades of harvest below the increment such a development is not per se unsustainable. It can be expected that a shift in the Austrian forests towards younger stands will slightly increase the average increment.

On the Construction of Chinese Government Procurement of Public Service Assessment System

To improve the way of governments to provide public services is a hot spot in academic and political studies in recent years. CCP Eighteenth Congress Report points out that, “we must change the means of providing public services through reasonable approaches, while using reasonable methods to improve the existing social management system.” Chinese society has entered a stage of rapid economic and cultural development, and only based on the fulfillment of the principles and policies implemented by the government since the eighteenth Congress can we truly promote the socio-economic and cultural development. By analyzing the problems in current government procurement of public services, this paper puts forward corresponding solutions so that these policies can help the government to create more public service value.

Stochastic energy procurement of large electricity consumer considering photovoltaic, wind-turbine, micro-turbines, energy storage system in the presence of demand response program

This paper proposes a stochastic energy procurement problem (SEPP) for large electricity consumer (LEC) with multiple energy procurement sources (EPSs) considering the effects of demand response program (DRP) and energy storage system (ESS). The EPSs contain power market (PM), bilateral contracts (BCs), micro-turbines (MTs), and renewable energy sources (RESs). Moreover, the RESs include photovoltaic (PV) systems and wind-turbines (WT). The ESS and DRP are incorporated in the SEPP by the LEC’s decision-maker to reduce the expected energy procurement cost (EEPC). Meanwhile, the uncertainty models of market price, load and RES output power are considered in the SEPP formulation. The error of forecasting of market price, load, temperature and radiation of PV systems are modeled using the normal distribution for generating the related scenarios. Also, the weibull distribution is used to generate variable wind speed scenarios for WT output power uncertainty modeling. Furthermore, the fast forward selection based on Kantorovich distance approach is used for the scenarios reduction. Finally, the influences of ESS and DRP on EEPC are investigated, and four case studies are used to illustrate the capability of the proposed SEPP. The obtained results demonstrate the efficiency of the proposed stochastic program.

Optimal dynamic procurement policies for a storable commodity with Lévy prices and convex holding costs

In this paper we study a continuous time stochastic inventory model for a commodity traded in the spot market and whose supply purchase is affected by price and demand uncertainty. A firm aims at meeting a random demand of the commodity at a random time by maximizing total expected profits. We model the firm’s optimal procurement problem as a singular stochastic control problem in which controls are nondecreasing processes and represent the cumulative investment made by the firm in the spot market (a so-called stochastic ‘monotone follower problem’). We assume a general exponential Lévy process for the commodity’s spot price, rather than the commonly used geometric Brownian motion, and general convex holding costs.We obtain necessary and sufficient first order conditions for optimality and we provide the optimal procurement policy in terms of a base inventory process; that is, a minimal time-dependent desirable inventory level that the firm’s manager must reach at any time. In particular, in the case of linear holding costs and exponentially distributed demand, we are also able to obtain the explicit analytic form of the optimal policy and a probabilistic representation of the optimal revenue. The paper is completed by some computer drawings of the optimal inventory when spot prices are given by a geometric Brownian motion and by an exponential jump-diffusion process. In the first case we also make a numerical comparison between the value function and the revenue associated to the classical static “newsvendor” strategy.

인프라스트럭처 조달 영역에서 보조금 지급의 법적 문제와 쟁점들 – 유럽연합의 보조금 규율정책을 중심으로 –

인프라스트럭처 조달 영역에서 보조금 지급의 법적 문제와 쟁점들 – 유럽연합의 보조금 규율정책을 중심으로 –

Negotiating cultures in corporate procurement

In a repeated procurement problem, the incumbent can undertake a relationship-specific investment that generates opportunity costs of switching for the buyer. We investigate the impact of the negotiating culture on investment incentives, favoritism in the procurement contract allocation, and buyer profit. We compare a stylized competitive negotiating culture with a stylized protective culture. The cultures differ in the way the buyer uses the entrance threat to exert pressure on the incumbent. Our main result is that the relative performance of the cultures depends non-monotonically on the expensiveness of the investment.

Quality problems in restaurants

I am writing about procurement of the restaurants in relation to the defects of quality. A lot of quality problems are resulted by negligence, so firms, restaurants can easily become bankrupt. Some reasons for quality defects should be avertable if workers of the given restaurant utilized the old stocks when cooking or in other ways. In addition, I will mention how to solve problems of quality defects. Naturally, restaurants can have other procurement problems, too, for example they need cooking equipment, dishes, utensils etc., but the goods can get spoiled if they are unutilized. The firm will not get back the expenses. They should make an effort to reduce costs. In some cases because of the substandard, they should destroy as refuse by other firms (the restaurants need contract with them). The only targets are to be competitive at a variety of market and to meet the customer’s requirements.

A hybrid constraint programming approach to a wood procurement problem with bucking decisions

In this article, we present a wood procurement problem that arises in Eastern Canada. We solve a multi-period wood supply planning problem, while taking into account bucking decisions. Furthermore, we present a new form of flexibility which allows the harvesting capacity to change from one time period to another. We study the impact of such flexibility upon the harvesting cost. We assess the performance of the problem by comparing it with a variant where the harvesting capacity is fixed during sites' harvesting. To address this problem, we develop a hybrid approach based on both constraint and mathematical programming. In the first phase, we propose a constraint programming model dealing with forest sites harvesting and bucking problems. The result of this model is used as part of an initial solution for the whole problem formulated as a mixed integer model. We test the two versions of the problem on a set of different demand instances and we compare their results.

The impact of alternative performance measures on portfolio procurement with contingent option contracts

This paper studies a single period procurement problem, in which a buyer procures using a set of contingent option contracts as well as the random spot market to meet the uncertain demand. For the contingent option contracts, the buyer can pay a unit reservation price for the right to buy a unit of product in the future at a discount rate of the market price. We analyze the portfolio procurement strategy in this setting, with both risk-neutral objective and risk measure of Conditional Value-at-Risk (CVaR) of the procurement cost. In the risk-neutral case, we show that the problem can be solved using a simple line search method. While for the CVaR objective, it is a difficult planning problem as the objective function involves multiplication of two random parameters, demand and spot price. Thus, we use the elegant solution approach for the risk-neutral problem to propose a simple heuristic for the risk-adjusted procurement problem with CVaR objective. Computational experiments show that our proposed heuristic works well in controlling risk exposure, while sacrificing slightly on the expected procurement cost. We also conduct numerical experiments to compare the solution and performance of these two alternative planning approaches and discuss the managerial insights.

A tractable two-stage robust winner determination model for truckload service procurement via combinatorial auctions

A combinatorial auction is one of the adopted mechanisms for truckload (TL) service procurement. In such an auction, the shipper faces a well-known winner determination problem (WDP): the shipper, as the auctioneer, is given bids submitted by a group of carriers. In most literature, WDP is modeled as a deterministic mixed-integer program (MIP) and is solved by standard MIP algorithms. However, in practice, the exact shipping demand is unavailable until after the auction. This shipment volume uncertainty has a significant impact on the solution to WDP. Therefore, a deterministic winner determination model with an estimate of shipment volume may not provide solutions that attain low procurement costs. This paper proposes a new tractable two-stage robust optimization (RO) approach to solve WDP for TL service procurement under shipment volume uncertainty. Assuming that only historical data is available, we propose a data-driven approach based on the central limit theorem (CLT) to construct polyhedral uncertainty sets. In particular, we consider two random cases: independent shipment volume and correlated shipment volume. A two-stage RO model with integer first-stage decision variables and continuous recourse variables is then formulated. We develop a reformulation solution method and use numerical tests to demonstrate that it is much more computationally efficient than the widely adopted Benders’ type constraint generation algorithm. We demonstrate by numerical tests that real-world sized instances of TL service procurement problems can be solved by our proposed robust method. Moreover, we compare our robust approach with benchmark and show that it is more tractable and robust to uncertainty.

Optimization models and algorithms for problems in procurement logistics

Procurement problems study the operational setting of a company that needs to collect products or raw materials from suppliers. In general, the underlying decision processes aim to elaborate a purchasing plan that completely satisfies the products demand while minimizing the procurement costs. Since procurement is a capital intensive decision that typically accounts for a large portion of a firm total cost (regardless of the type of purchased goods), it is of crucial importance to have mathematical models and efficient solution algorithms in place. The present thesis proposes the study, under a quantitative perspective, of different optimization problems arising in the procurement logistics context, namely, the Capacitated Total Quantity Discount Problem (CTQDP), the Traveling Purchaser Problem (TPP), the Restricted Traveling Purchaser Problem with Total Quantity Discount (RTPP-TQD), the Traveling Purchaser Problem under Uncertainty (TPP-U), and the Multi-Vehicle Traveling Purchaser Problem with Pairwise Incompatibility Constraints (MVTPP-PIC). All these problems share some characteristics, as the presence of multiple suppliers and multiple products, as well as the possibility of selecting a subset of suppliers at an operating level. Moreover, in order to be more realistic, each singular problem takes into account one or several complicating features as quantity discount policies, transportation costs and routing optimization, multi-vehicle optimization, data uncertainty, and restrictions on the vehicle loading (capacity constraints or incompatibilities among products). For all these problems, optimization models and solution algorithms (exact and/or heuristic) are proposed, compared, and validated through consistent computational experiments. The solution algorithms generally rely on consolidated mathematical programming techniques and on the analysis of the specific problem.

Determinants of Decision for Non-Farm Entrepreneurship By Women Farmers In Ikwuano LGA, Abia State

Recent years have witnessed numerous Government efforts to boost agricultural production in Nigeria. A key input to achieve this is credit. In the face of formal credit acquisition bottlenecks, there is the need to shift attention to non-farm entrepreneurship, as income made in this sector could be invested in agriculture. This study therefore evaluated determinants of decision for non-farm entrepreneurship by women farmers in Ikwuano Local Government Area of Abia State. The specific objectives of the study were to: describe the socio-economic characteristics of women farmers engaged in non-farm enterprise in the study area; determine factors that influence women decision to embark on non-farm enterprise in the study area; and identify problems constraining women from embarking on non-farm enterprise in the study area. A hree stage random sampling technique was adopted in the selection of 120 respondents for the study. Analytical tools utilized, were frequency distribution tables, percentages, means and probit regression model. The probit regression analysis revealed that age, household size, primary occupation, farm income, access to credit, farming experience and membership of cooperative societies were significant determinants of women farmers decision to embark on non-farm enterprise at varied signs and levels of significance. The women were constrained from embarking on non-farm business by lack of startup capital (43.33%), inadequate credit access (35.00), and land procurement barriers (31.67). In line with the findings of the study, it was recommended that the Land Use Act of 1978 should be fully implemented as it will ameliorate the persistent land procurement problem faced by women farmers in Nigeria. Key Words : Decision Determinant, Non-farm Entrepreneurship, Income Generation.

Rethinking contract design: Why incorporating non-legal drivers of contractual behavior in contracts may lead to better results in complex defense systems procurement

Defense acquisition programs are plagued by surging delays and cost overruns. In particular, contract management of defense acquisition programs has been identified as 'high risk' - and threatening to project results. This article examines how contracts, as legal mechanisms, may be disruptive and obstruct cooperation between the DoD and contractors. The main observation this article makes is that tensions between the norms set forth in contracts and other non-legal norms can become a major reason for problems in defense procurement. It explains why these tensions may undermine cooperative behavior between contractors and the DoD and can become a source of disappointing acquisition program results. A framework is provided for identifying such tensions, and contract design principles are proposed to enhance cooperation and eliminate these tensions when drafting contracts for defense acquisition and other complex programs.