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The structure of the optimal combined sourcing policy using capacity reservation and spot market with price uncertainty

Author

Listed:
  • Karl Inderfurth

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

  • Peter Kelle

    (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)

Abstract

This contribution focuses on the cost-effective management of the combined use of two procurement options: the short-term option is given by a spot-market with random price, whereas the long-term alternative is characterized by a multi period capacity reservation contract with fixed purchase price, reservation level and capacity reservation cost. Considering a multiperiod problem with stochastic demand, the structure of the optimal combined purchasing policy is derived using stochastic dynamic programming.

Suggested Citation

  • Karl Inderfurth & Peter Kelle, 2009. "The structure of the optimal combined sourcing policy using capacity reservation and spot market with price uncertainty," FEMM Working Papers 09002, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    • Handle: RePEc:mag:wpaper:09002
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    File URL: http://www.ww.uni-magdeburg.de/fwwdeka/femm/a2009_Dateien/2009_02.pdf
    File Function: First version, 2009
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    Cited by:

    1. Karl Inderfurth & Peter Kelle & Rainer Kleber, 2014. "The Effect of Material Price and Product Demand Correlations on Combined Sourcing and Inventory Management," FEMM Working Papers 140013, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.

    More about this item

    Keywords

    Capacity reservation; spot market; purchasing policy; supply contracts; stochastic inventory control;
    All these keywords.

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