A practical expected-value-approach model to assess the relevant procurement costs

A practical expected-value-approach model to assess the relevant procurement costs

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Article ID: iaor201525800
Volume: 66
Issue: 4
Start Page Number: 539
End Page Number: 553
Publication Date: Apr 2015
Journal: Journal of the Operational Research Society
Authors: , ,
Keywords: decision, risk
Abstract:

As an improvement to a series of expected value approach models, this study presents a supplier portfolio decision model, rather than a number of suppliers decision model. The model assesses risks as costs, considers types of heterogeneity in a procurement process and links the assessed terms in the programming model with accounting concepts. The model is then confirmed by using a procurement decision case with real data. The analysis has several implications for modelling, application and practice. In the light of the counterexamples shown, some thoughts pertaining to procurement decisions in supply management are reconsidered.

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