Document Type

Thesis

College

College of Engineering

Department

Industrial and Engineering Management

Degree

MS in Engineering Management

Date Completed

2019

First Committee Member

Li, Zhaojun

Second Committee Member

Salmon, Christian

Third Committee Member

Niknam, Seyed Ahmad

Additional Committee Member(s)

Rahnamai, Kourosh; Cheraghi, Hossein

Abstract

"Procurement costs have a significant impact on the profits of a Value-add manufacturer. These profits, in turn, are heavily influenced by the business environment and ensuing market demands. Therefore, a procurement policy, that is responsive to business environment and ensuing market demands, can determine the profitability and business success of an organization. This thesis describes a methodology that can help an organization achieve this flexibility to changing business environment. The methodology develops a recursive simulation model for probabilistic demands reflecting the changing business environment. These demands and current procurement policy decide the associated profits for different business environments. The demands, dependent upon the business environment, are random variables and therefore the associated profits are also random variables. The simulation model generates probabilities for profits and associated cumulative distribution charts for each of the procurement policies and each of the business environment. The cumulative distribution charts provide Value-add manufacturer the heuristic assessment to access and choose between the compared procurement policies. For analytical assessment and choice, the Value-add manufacturer also use the method of bootstrapping as shown in the thesis. The model in this thesis is for any form of Value-add manufacturer and it is recommended that this be used multiple times during the organizations planning horizon."

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