| Abstract
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The thesis combines inventory management and sourcing decisions in the presence of either price or yield uncertainty. First, we consider a continuous review inventory model in which suppliers make deal offers with random discount prices at random points in time. We assume that the demand is constant over time, lead times are negligible, discount offerings follow a Poisson process, and discount price is a discrete random variable with a known distribution. We propose an (R, s, Q1, Q2, ..., Q) policy under which an amount R is ordered when the inventory level hits zero, a discount offer is rejected if the inventory on hand is more than s, and the inventory level is raised to a target s+Qi when a discount offer at price ci (i = 1, 2, ..., n) is accepted. We then derive optimality conditions for the (n + 2) policy parameters. Though the model has been developed for the case of a single supplier, it can be used with the presence of multiple suppliers provided that suppliers are differentiated only by the discount price distribution and by the deal offer rate. Numerical examples are presented to demonstrate cost savings due to discount offers as well as to shed light on the managerial insights in the problem of optimal supplier selection. Second, we develop two EOQ-based inventory models in which an inventory manager must determine the order size as well as the supply reliability level in the presence of uncertainty in the quality and/or quantity of supply. The number of acceptable units in the order is captured by the binomial yield model, and an improvement in reliability increases both the order setup cost and the unit price. For each model, we present an equation of which a solution is the optimal reliability level and a closed-form solution for the optimal order size given the optimal reliability level. We then compare the two models with regard to their reliability levels. Furthermore, these two models are extended to multiple-supplier cases where the suppliers' order quantities are to be optimized. Using each model, we then address the supplier selection problem and conclude that multiple sourcing is never optimal. This is contrary to the literature advocating diversification in supply base in the presence of uncertainty.
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