The main focus of the thesis is to develop an optimal procurement policy for raw materials, that is, reorder points and optimal order quantities, for a multinational company. We develop a multiple period mixed integer programming model that takes into account the variation in demand that occurs in the forecasted demands for raw materials from one month to another. Later, we allow for backorders and introduce a service level criterion for each of the raw material. The model also includes the cost of holding inventory and a fixed cost of ordering whenever an order is placed during a given period.The model is illustrated with real data collected from a health and hygiene company that operates in more than 35 countries around the globe. For this case study, inventory, financial information, leadtimes and demand information are collected. Raw materials demand requirements in turn relates to the demand of finished goods through the Bill of Materials (BOM) structure. Thus, finished goods demand is characterized so raw materials demand can be accurately estimated. Financial information includes procurement, transportation, administrative and holding costs, as well as suppliers discounts policies or any other costs related to stocking up raw materials. Order lead-times, which account for supplier processing time, shipping and administrative times due to orders consolidation and handling, have also been taken into account.The model was run monthly, on a rolling horizon basis, over the entire planning horizon, and only the results obtained for the period in which the model was run (namely, the first month) was implemented each time. By doing this, we were able to capture the changes in the forecasted demand from month to month and the variations in the raw materials delivery schedule. Finally, recommendations regarding the implementation of the proposed policy, as well as future issues, such as demand and lead time variations, have been discussed.
