| The purchasing function is often the most critical function in an organization since purchased material typically is the largest component of cost for many products. This paper presents models analyzing tradeoffs in supplier selection and centralized purchasing decisions. Related literature is organized in Chapter 2. Chapter 3 analyzes the tradeoffs among speed, reliability, and price in a single sourcing environment. The total logistics cost function is examined using a continuous review inventory system. Theoretical and computational comparisons of the total logistics costs provide useful insights in selecting suppliers for purchasing managers.;Chapter 4 provides easily calculated bounds of total logistics cost function when a dual sourcing strategy is implemented. Using a large numerical experiment design, we show that the bounds are generally tight under most purchasing environments. This indicates that using the bounds to approximate the cost of dual sourcing is an efficient way compared to other complicated models in literature. In addition, managers can use the bounds to determine whether a single or dual sourcing strategy should be used in most purchasing scenarios.;Chapter 5 presents models which illustrate the important tradeoffs between centralized and decentralized purchasing systems, with particular emphasis on the inclusion of quantity discounts and the role that centralized purchasing can take in garnering them. Five scenarios have been explored: (1) complete decentralization, (2) centralized pricing with decentralized purchasing, (3) centralized purchasing with local distribution, (4) centralized purchasing and warehousing with batch distribution, and (5) centralized purchasing and warehousing with JIT distribution. Numerical experiments suggests that inventory management policies among different scenarios will have less impact on the choice of the best scenario than differences in purchase price schedules or transportation costs (and lead times). |
