Methods for parts procurement quantity determination where demand is

Abstract

Methods are described for predicting parts procurement requirements for products over a plurality of time periods, with certain of the parts being common to a plurality of products. The actual demand for the products is unknown, but the method assures that a specified service level is met for all products and minimizes expected excess part inventories. The methods are provided with inputs which, among others, includes lists of parts for each product, prices for the parts, and demand forecasts for each product in each time period, each forecast in the form of a mean and standard deviation. The description of the problem includes an objective function of minimizing expected excess inventory while satisfying the constraint that a specified service level be achieved. The problem is transformed into an unconstrained problem through the use of a Lagrange multiplier. The solution is achieved by performing a one parametric search on the value of the multiplier. The solution may achieve higher service levels than specified. Additional methods are described for improving the procurement decisions to more closely meet the service requirement.