# Market-Oriented Procurement Planning Leading to a Higher Service Level and Cost Optimization
## 4 Results and Discussion
### Simulation Results
\begin{table}
\begin{tabular}{c c c c c} \hline \hline \multirow{2}{*}{**No.**} & \multirow{2}{*}{**Key Indicator**} & **1. EOQ** & **2. Reorder-Point** & **3. Market-Oriented** \\  & & **Simulation Model** & **Simulation Model** & **Simulation Model** \\ \hline
1 & \(\sum\) Demand (products) & 201,273 & 201,273 & 201,273 \\
2 & MAD of the forecast (products) & 163.6 & 163.6 & 23.7 \\
3 & \(\mathcal{O}\) WIP stock (products) & 6773 & 11,986 & 12,712 \\
4 & \(\mathcal{O}\) stock at Tier 1 producer (products) & 4745 & 4593 & 5039 \\
5 & \(\mathcal{O}\) stock at OEM producer (products) & 2028 & 7393 & 7612 \\
6 & Utilization rate of employees (\%) & 74.5 & 79.3 & 99.2 \\
7 & On-time delivery (\%) & 62.2 & 96.9 & 98.7 \\
8 & Service level (\%) & 60.8 & 93.3 & 98.8 \\
9 & \(\mathcal{O}\) Procurement quantity (products) & 2120 & 4262 & 3798 \\
10 & \(\mathcal{O}\) Customer backlog (products) & 177.0 & 15.8 & 6.7 \\
11 & \(\sum\) Weeks with customer backlog (weeks) & 157 & 27 & 5 \\
12 & \(\sum\) Inventory costs (mil. USD) & 4135 & 3606 & 3514 \\
13 & \(\sum\) Procurement costs (mil. USD) & 1938 & 2051 & 2018 \\
14 & \(\sum\) Capital commitment costs (mil. USD) & 643 & 1291 & 1293 \\
15 & \(\sum\) Storage costs (mil. USD) & 138 & 138 & 107 \\
16 & \(\sum\) Stock-out costs (mil. USD) & 1416 & 126 & 54 \\
17 & \(\sum\) Investment costs (mil. USD) & 123 (t = 109) & 166 (t = 327) & 381 (t = 72) \\ \hline \hline \end{tabular}
\end{table} 
Table 10: Simulation results for the second demand scenario. \begin{table}
\begin{tabular}{c c c c c} \hline \hline \multirow{2}{*}{**No.**} & \multirow{2}{*}{**Key Indicator**} & **1. EOQ** & **2. Reorder-Point** & **3. Market-Oriented** \\  & & **Simulation Model** & **Simulation Model** & **Simulation Model** \\ \hline
1 & \(\sum\) Demand (products) & 149,965 & 149,965 & 149,965 \\
2 & MAD of the forecast (products) & 42.0 & 42.0 & 18.3 \\
3 & \(\mathcal{O}\) WIP stock (products) & 16,262 & 19,640 & 17,769 \\
4 & \(\mathcal{O}\) stock at Tier 1 producer (products) & 11,817 & 10,467 & 12,743 \\
5 & \(\mathcal{O}\) stock at OEM producer (products) & 4446 & 9173 & 5026 \\
6 & Utilization rate of employees (\%) & 70.1 & 72.9 & 98.9 \\
7 & On-time delivery (\%) & 99.9 & 100.0 & 100.0 \\
8 & Service level (\%) & 99.8 & 100.0 & 100.0 \\
9 & \(\mathcal{O}\) Procurement quantity (products) & 2077 & 3741 & 2252 \\
10 & \(\mathcal{O}\) Customer backlog (products) & 0.1 & 0 & 0 \\
11 & \(\sum\) Weeks with customer backlog (weeks) & 1 & 0 & 0 \\
12 & \(\sum\) Inventory costs (mil. USD) & 3567 & 3737 & 3370 \\
13 & \(\sum\) Procurement costs (mil. USD) & 1628 & 1538 & 1538 \\
14 & \(\sum\) Capital commitment costs (mil. USD) & 1823 & 2083 & 1752 \\
15 & \(\sum\) Storage costs (mil. USD) & 116 & 116 & 80 \\
16 & \(\sum\) Stock-out costs (mil. USD) & 0.4 & 0 & 0 \\
17 & \(\sum\) Investment costs (mil. USD) & 310 (t = 124) & 326 (t = 114) & 338 (t = 21) \\ \hline \hline \end{tabular}
\end{table} 
Table 9: Simulation results for the first demand scenario. Regarding the cost analysis, the MO model had the best performance with almost USD 100 mil. less costs compared with the RP model and more than USD 600 mil. less than the EOQ model. In addition, the MO model opened a new warehouse in week 72, enabling high service level assurance with more storage capacity and shorter lead times, while the other two models opened a new warehouse later. To summarize, for this scenario and lifecycle-demand curve, the MO model presented the best performance for the service level and had the lower inventory costs with the higher capacity utilization of employees as it adapted all areas of inventory management to the customer demand. As can be seen in Table 11, the MAD was more than three times lower for the market-oriented (MO) model due to the selection of the forecasting technique based on the set of methods presented in Section 3. In addition, inventories were lower for the EOQ model due to its lack of safety stocks in the model, while the other two models presented inventories of around 14,000 units on average.