Abstract :
The concepts of a proprietary software product developed by Tetra Tech, Inc. are discussed. The model has been a useful decision-making aid for purchasing volatile commodities traded on exchanges used in production processes. The model assumes a finite planning horizon and fixed holding, interest, and in-out charges. Dynamic programming under uncertainty is used to develop purchase (and short sale) schedules for maintaining optimal inventory when price of raw material, demand for finished product, and many other factors are known only in terms of an estimated distribution function.
