Accession Number : AD1014673

Title :   A Real Options Approach to Quantity and Cost Optimization for Lifetime and Bridge Buys of Parts

Descriptive Note : Technical Report

Corporate Author : University of Maryland College Park College Park United States

Personal Author(s) : Sandborn,Peter ; Goudarzi,Navid

Full Text :

Report Date : 01 Dec 2015

Pagination or Media Count : 17

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 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.

Descriptors :   Electronic equipment , life cycle costs , life cycles , obsolescence , spare parts , acquisition , Militarily critical technologies , Military procurement

Distribution Statement : APPROVED FOR PUBLIC RELEASE