A simple heuristic for dynamic order sizing and supplier selection with time-varying data

In this paper we consider the problem of supplier selection and purchase order sizing for a single item under dynamic demand conditions. Suppliers offer all-units and/or incremental quantity discounts, which may vary over time. Although the problem refers to a typical planning task of a purchasing agent, which is often solved without algorithmic assistance, in an eBusiness (B2B) environment, the need for the integration of an automatic performance of this planning task into a web-based procurement process becomes evident. A new model formulation for this problem is developed, and a simple but easily extendible heuristic procedure is presented and tested. The heuristic is implemented as part of the Advanced Planner and Optimizer software of SAP AG, Walldorf, Germany.