A Single Supplier Procurement Model With Random Yield

In this paper, we develop a procedure for selecting a supplier. Suppliers are characterized by their lead time, price and quality (random yield). Each purchased item is acceptable with a given probability and independent of the others. We assume the demands are deterministic with no set-up cost and backordering is allowed. For each supplier, an optimal ordering policy is developed. We prove the optimal policy is myopic if the value of items remains constant.

Keywords:

Supplier selection , Random Yield , Production/Inventory , Dynamic programming , Myopic Policy