# Market-Oriented Procurement Planning Leading to a Higher Service Level and Cost Optimization
## 3 Design of the Conceptual and Simulation Models
### Simulation Models  
Based on the basic framework and on the following characteristics, different types of simulation models can be derived:  
1. Forecasting method: 1. The forecasting method is the same over the lifecycle. It allows changes in the parameters of the method over time. 2. The forecasting method changes over time depending on selected criteria, such as the forecast error within a certain period. This also allows changes in the parameters of the method over time.
2. Procurement policy: 1. The procurement policy is the same over the lifecycle. This allows changes in the parameters of the method over time. 2. The procurement policy changes over time depending on selected criteria, such as the variation coefficient within a certain period. This also allows changes in the parameters of the method over time.  
Strategy for decision-making and product lifecycle:  
* Decisions at all levels, strategic, tactical, and operational, including investments, employee characteristics, and as well as the safety factor, k, do not depend on the product lifecycle.
* Decisions at all levels, strategic, tactical, and operational, depending on the product lifecycle. Criteria such as years or time until end-of-lifecycle are considered.  
As a result of the above-mentioned possibilities and their methods, multiple combinations of models can be obtained. However, to check the hypothesis of a model able to respond to market demands by applying a feedback control loop, the research proposes the following models as shown in Figure 4:  
* EOQ simulation model: This is described by a model applying 1a with a cumulative moving average as a forecasting method, 2a with a (t, q)-policy with an EOQ order quantity and 3a with decisions not dependent on the product lifecycle.
* Reorder point simulation model: This is a model described by 1a with a cumulative moving average as a forecasting method, 2a with an (s, S)-policy, reorder point policy and 3a with decisions not dependent on the product lifecycle.
* Market-oriented simulation model with 1b, i.e., one of the methods described in Section 3.2 with the possibility to change to another method based on selected criteria, such as the forecast error. Moreover, this model is described by 2b selecting one of the four policies in Table 5 and has the capability of changing to other policies and by 3b with decisions dependent on the product lifecycle.  
The EOQ and Reorder-Point models are models based on the literature, while the third model, the market-oriented model, was built based on the cybernetic model developed within the research. The characteristics of the models are described in Table 8:  
Figure 4: Simulation models (own elaboration). Economic order quantity (EOQ).  
The organizational decisions are based on forecasts for the related planning horizons. The investment options are analyzed attending to static limits for the EOQ and RP model, while, for the market-oriented model, the investment options are assessed with control limits depending on the product lifecycle and demand planning.  
Decisions and changes in the simulation model are performed autonomously. The observer can analyze the results and changes for the selected simulation model to answer and to derive strategies for the potential what-if-scenarios.