An improved mathematical model for making certain procurement-related decisions in sri lankan industry

Abstract

Reducing unnecessary costs is a decisive factor in any industry for making maximum profits. The use of sophisticated machinery in the industry to enhance and strengthen operational efficiency has increased. However, the market prices of such machines have been continuously increasing due to the current economic crisis. Even if an organization needs to procure a machine, it is hardly affordable because they have a limited budget. This type of case can be observed mainly in the construction and IT fields. Such industries may choose the option of renting or leasing the machine for the required time. The objective of the present work is to support decision-makers or top management in the industry in choosing the best possible option among buying, leasing, and renting, thus reducing expenses drastically. The model was developed using concepts in actuarial mathematics, and the present value of the annuity was used in theory. A series of monthly payments were considered with the depreciation of the currency value, which is changed with the current inflation rate of the country, and the total costs were calculated separately for the three alternatives. Hence, the lowest price to be incurred for buying, leasing, or renting was recognized as the ideal decision for the business organization. An improved user interface based on the Java programming language has been developed to enter the inputs directly into the system and to display the output in a comprehensive way. The user has been further assisted by adding a HELP menu for vocabulary in business finance.