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Abstract
Traditional procurement policy was deeply investigated for many kinds of demand in different industrial sectors. More extensive explorations on procurement including the combination with manufacturing process and detailed attributes of the purchased products were conducted by many researchers. In manufacturing process, lifespan of machining tools have significant impact on both the quantity of procurement and production cost. In this paper, the impact of maximum allowable stopping time for machining tools on production-inventory policy under a stochastic production demands was investigated. A tool procurement policy with stochastic demand (TPPSD) was developed with which the allowable stopping time for tools and review cycle can be optimally determined by an exhaustive searching algorithm. Examples with different distributions on tool lifespan and production demand are presented to show the implementation of the TPPSD model. The results show that optimised combination of selection for tool allowable stopping time and review cycle time can dramatically minimise the total cost of the whole procurement activity.