Authors: Shantanu Shankar Bagchi; A.K. Rao
Addresses: Department of Operations, Institute of Management Technology, Hyderabad, India ' Department of Operations and IT, IBS Hyderabad, India
Abstract: Determining the optimum number of suppliers and the optimum quantities to order from each of them is a critical problem for any supply chain. The objective of this paper is to identify the optimal sourcing policy of a retailer for the single and multi-period context when the firm can source its order to multiple suppliers along with a back-up supplier for the emergency situations. The expected total profit is mathematically modelled for single and multi-period scenarios. The optimal sourcing policy is obtained by maximising the expected total profit with respect to the order quantities. Closed form solution is obtained for uniformly distributed demand for both single and multi-period scenarios. It is observed that the multi-period solution is less sensitive compared to the single-period solution. Also it is found that it is optimal for the firm to lessen the amount of supplier diversification in case of planning for multiple periods.
Keywords: sourcing; supplier yield; stochastic model; demand uncertainty; supply uncertainty; optimisation.
International Journal of Operational Research, 2020 Vol.38 No.2, pp.166 - 192
Received: 22 Nov 2016
Accepted: 03 Sep 2017
Published online: 30 Mar 2020 *