Project procurement and disposal decisions: An inventory management model

In this paper, we develop a two-stage mathematical model to examine an important inventory management problem within a large-scale project context. Specifically, we analyze the procurement and disposal of an important, expensive item (e.g. pipeline). There is uncertainty surrounding total requirements of this item during a project. Surplus stock on-hand at the conclusion of the project may be disposed for revenue. However, it may be retained to satisfy requirements during a subsequent project. The time between projects follows a discrete probability distribution. The key decision variables involve the procurement quantity in the initial project as well as the best disposal quantity (should a surplus exist) at the conclusion of the project.