OPTIMAL SCHEDULING OF PURCHASING ORDERS FOR LARGE PROJECTS

Abstract

The completion of a typical project hinges upon receiving all the purchased components by the time they are scheduled to be used. Some of these components may have long stochastic lead times, so the project manager is tempted to order them ASAP, to avoid the (usual) high penalties associated with delays. (The penalties may be tangible or intangible, but we assume that they can be measured by monetary units.) This in turn may bring about excessive inventory holding costs. Clearly an optimization is called for to minimize the total expected cost of the project. This is achieved by timing the orders optimally, for the one component case as well as for the n component general case.