Acquisition policy for multi‐item multi‐supplier system with inventory capacity constraint

With the oligopolistic conditions of the market, manufacturing organisations are looking forward for developing optimal acquisition policies to procure products from suppliers. In this paper, we investigate cost optimisation problem in a multi‐supplier system with multiple items when there is a limitation on size of the inventory. Supplier's acquisition policy is suggested which evaluates optimal quantity to be ordered for various items to different suppliers so as to optimise the total cost incurred. We develop an algorithm, which computes the cycle time of placing the order for each item. The solution is focused on finding out the periodic order quantities of various items to be placed to each supplier, the cycle time and the number of times the order to be placed in each cycle. The numerical results are provided to validate the analytical model and examine the implementation of computational algorithm. The sensitivity analysis is also carried out to explore the effect of different parameters.