Supplier Selection and Order Quantity Allocation: A Comprehensive Model

Abstract

SUMMARY In today's competitive environment, it is extremely difficult to successfully produce high quality, low cost products without considering a satisfactory set of suppliers. A useful approach to ensure the reliability of a manufacturer's supply stream is to follow a multiple sourcing policy. Mathematical programming techniques lend themselves nicely by providing optimal solutions to several instances of the problem. However, a recent review of supply selection methods (Weber et al. 1991) identified very few articles that have proposed mathematical programming techniques to analyze supplier selection decisions. Given the economic importance and inherent complexity associated with the supplier selection problem, this article proposes a mixed integer programming approach to solve the supplier selection program. The modelSUPPSEL (Supplier Selection) simultaneously decides the set of suppliers and order quantity allocations among them.