A decision tree approach for selecting between demand based, reorder, and JIT/kanban methods for material procurement

In designing mechanisms for the procurement of raw materials, a manager is often faced with the task of selecting from a variety of possible methods. Since the performance of these methods is a function of the environment in which they are implemented, it is the responsibility of the manager to select the method best suited for a particular application. In this paper we present a methodology for assisting managers in the selection process. Specifically, three classes of procurement methods are considered, these are: Demand based, reorder, and JIT methods. The selection methodology is structured as a decision tree, which considers the annual usage value, lead time ratio, holding cost, vendor location, vendor delivery performance, and material supply value. Each factor is evaluated on a three level scale, and on the basis of these evaluations the tree makes a selection. The application of the methodology is illustrated via some examples.