A Non-Linear Procurement Model with Quantity Discounts

Abstract

This paper presents a procurement model for a multinational oil company with affiliate plants located worldwide. The proposed model uses a quantity discount relationship to reduce the total procurement cost. We use a non-linear programming method to solve the model and make comparisons with the current approach used by the oil company. The proposed approach has several distinct advantages: assured minimum cost, ease of data management, flexibility in design, and accuracy in results.