Multiple sourcing and order allocation problem under supplier disruption risk and quantity discount
by Faiza Hamdi; Faouzi Masmoudi; Lionel Dupont
International Journal of Services, Economics and Management (IJSEM), Vol. 9, No. 3/4, 2018

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.

Online publication date: Sat, 09-Feb-2019

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