Evaluating Procurement Strategies under Uncertain Demand and Risk of Component Unavailability

Anssi Käki, Ahti Salo

Research output: Chapter in Book/Report/Conference proceedingConference contributionScientificpeer-review


In high-technology manufacturing, failure to access non-commodity components can interrupt production, because there are typically no substitute suppliers. Moreover, demand and supply uncertainties can be interdependent, because supplier problems are more probable when demand is high. Most earlier risk management models treat these uncertainties as independent risk factors. We present a framework where judgmental information is captured with a scenario tree and a stochastic decision model is used to evaluate alterative procurement strategies consisting fixed quantity contracts for cost minimization and flexible quantity contracts for risk management.

Original languageEnglish
Title of host publicationOperations Research Proceedings 2010
Subtitle of host publicationSelected Papers of the Annual International Conference of the German Operations Research Society
EditorsB Hu, K Morasch, S Pickl, M Siegle
PublisherSpringer Berlin Heidelberg
Number of pages6
ISBN (Electronic)978-3-642-20009-0
ISBN (Print)978-3-642-20008-3
Publication statusPublished - 2011
MoE publication typeA4 Article in a conference publication
EventAnnual International Conference of the German Operations Research Society - Neubiberg, Germany
Duration: 1 Sep 20103 Sep 2010

Publication series

NameOperations Research Proceedings: GOR (Gesellschaft für Operations Research e.V.)
PublisherSpringer Berlin Heidelberg
ISSN (Print)0721-5924


ConferenceAnnual International Conference of the German Operations Research Society
Abbreviated titleOR



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