Please use this identifier to cite or link to this item: https://dair.nps.edu/handle/123456789/2656
Title: A Real Options Approach to Quantity and Cost Optimization for Lifetime and Bridge Buys of Parts
Authors: Peter Sandborn
Navid Goudarzi
Keywords: Logistics Management
Procurement
Lifetime Buy
Bridge Buy
Diminishing Manufacturing Sources and Material Shortages (DMSMS)
Issue Date: 30-Dec-2015
Publisher: Acquisition Research Program
Citation: Published--Unlimited Distribution
Series/Report no.: Real Options Theory
UMD-LM-16-011
Abstract: Mismatches between part procurement life cycles (especially for electronic parts) and the life cycles of the systems that parts are used in cause systems with long manufacturing and/or support lives to incur significant obsolescence management costs. While lifetime and bridge buys, which are used to manage part discontinuance (i.e., obsolescence) during the support of critical systems are simple in concept, the challenge is determining the optimum number of parts to buy and understanding their true cost. This report presents a real options approach to valuate lifetime and bridge buys and to determine the optimum part quantity for a lifetime or bridge buy. The approach accommodates uncertainties in demand, holding costs and end of support dates.
Description: Logistics Management / Grant-funded Research
URI: https://dair.nps.edu/handle/123456789/2656
Appears in Collections:Sponsored Acquisition Research & Technical Reports

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