Title: Multiple sourcing and order allocation problem under supplier disruption risk and quantity discount

Authors: Faiza Hamdi; Faouzi Masmoudi; Lionel Dupont

Addresses: Unité de recherche de Logistique, Gestion Industrielle et Qualité (LOGIQ), Institut supérieur de gestion industrielle de Sfax, Université de Sfax, Tunisia; College of Business (COBuj), University of Jeddah, Elkamel, Jeddah, Saudi Arabia ' Laboratoire de recherche de Mécanique, Département de génie mécanique, École Nationale d'Ingénieurs de Sfax, Modélisation et Production (La2MP), Université de Sfax, Tunisia ' Centre de génie industriel (CGI), École des Mines d'Albi-Carmaux, Université de Toulouse, Toulouse, France

Abstract: In this paper, we developed two stochastic mixed integer linear programs. The objective is to determine the optimal order quantities for each supplier in order to maximise the expected net profit (ENP) under disruption risk. In fact, to model this situation, overall combination of disruption probability under different settings is calculated first, and then the expected profit function for neutral risk setting is developed. Afterward, this model is extended to minimise the operational loss to model the risk averse behaviour. Discount on total quantity and on business volume are considered. The two models are illustrated through a numerical study and sensitivity analysis. The result shows that the expected profit and expected losses are very influenced by failure probability and discount levels. In fact, in presence of disruption risk, it is better to allocate order quantity from supplier who offers large discount level.

Keywords: selection supplier; disruption risk; stochastic MILP; expected net profit; ENP; expected losses; aversion risk; neutral risk; discount on quantity; discount on total volume; sensitivity analysis.

DOI: 10.1504/IJSEM.2018.097788

International Journal of Services, Economics and Management, 2018 Vol.9 No.3/4, pp.272 - 294

Received: 29 Sep 2017
Accepted: 27 Aug 2018
Published online: 09 Feb 2019 *

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