Adaptive Simulation of an Integrated Procurement-Inventory System with Incomplete Lead Time Information

Abstract

The functions of procurement, inventory control and warehousing are shown to be an integrated system which requires consideration of the costs of all the related functions in order to specify an policy which has a minimum total cost for a desired level of service. A stochastic environment is assumed in which a Poisson distrubuted demand is known and initially only an estimate of the average lead time is available for each vendor. An adaptive model is developed which specifies a policy using a dynamic programming algorithm and then simulates on year\u27s activity utilizing the policy