# Market-Oriented Procurement Planning Leading to a Higher Service Level and Cost Optimization
## 3 Design of the Conceptual and Simulation Models
### Design of Case Study to Test the Model Depending on the Product Lifecycle
The minimum and maximum production capacities per shift are the same for all models at the beginning of the simulation study;
* The storage capacities have a maximum level, and it is the same for all models at the beginning of the simulation;
* Maintenance is not considered in the production facilities nor in the storage warehouses;
* Products do not suffer any kind of problems/failure in their transportation from the production facility to the customers;
* Packaging is already performed in the production facility. As a fourth step, the exogenous variables as inputs to the model are described. In the case study, these are:  
* Market demand: This is defined by values read from a database outside of the model. Demand defines the evolution of customer requests and the phase of the product lifecycle. The length of the product lifecycle is also an input that can influence the decision-making process depending on the risk. * Supply chain flow: There are two configurations: the supply chain can contain WIP products or not. The first represents a supply chain flow already in existence, and the second represents a new supply chain flow of products. The scenarios simulated are from the first type. * Production capacity: There is a maximum of 900 units per week in three shifts at the beginning of the simulation. During the simulation, investment options are considered for increasing the capacity if needed and if the conditions for the decision are given. * The storage capacity at the beginning of the simulation is five weeks for Tier 1 and for the OEM manufacturer for the maximum of 600 units per week considering two working shifts, therefore, totaling 3000 units of storage capacity. * Working shifts: At the beginning of the simulation, there are two working shifts. * The personnel capacity at the beginning of the simulation is a group of 20 employees at both warehouses of Tier 1 and OEM with a capacity of 15 units per shift to be processed. * Investment, costs, prices, and interest rates: All these values per unit for the different types of economic parameters are inputs from outside of the model as well as the values of the investments for new capacities. * Replenishment times between stages: The distribution is set at the beginning and can only change if a new warehouse is put in operation. Finally, the potential decisions, according to Section 3.1, are described:  
* New Investment--new warehouse and production facilities: This can increase capacities as well as reduce lead times at both Tier 1 and OEM producers. * Investment in the increase in production and storage capacities in the existing locations: This can increase capacities for both Tier 1 and OEM producers maintaining lead times. * Demand planning: The decision of changing or not changing between the different forecasting methods applied to the conceptual model based on the forecast error. The change has impacts on all levels of the planning and organizational decisions. * Planning decisions:
* Inventory planning: safety stock level (k) changes as required for the target service level. This also decides whether to order each t periods or when the inventory drops under s, the reorder point level. * Procurement planning: The selection of one of the four policies of Table 5 as it is assumed that the inventory is checked after each stock movement. The (t, q) applies an economic order quantity calculated once and applied until the policy changed, the (t, S) strategy has a constant distance between orders and the S is calculated based on a dynamic target level consisting of safety stock and base stock. The (s, q)-Policy applies an economic order quantity calculated each time the inventory level drops below the reorder point, and the (s, S)-Policy orders the quantity to reach the target level, S, when inventory drops below s.
* Organizational decisions:
* Number of working shifts: Based on the demand forecast, the planning of 3, 2, or 1 working shift is performed.