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A multi-echelon inventory system with supplier selection and order allocation under stochastic demand

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  • Guo, Cong
  • Li, Xueping

Abstract

This paper investigates an integrated supplier selection and inventory control problems in supply chain management by developing a mathematical model for a multi-echelon system. In particular, a buyer firm that consists of one warehouse and N identical retailers procures a type of product from a group of potential suppliers, which may have different prices, ordering costs, lead times and have restriction on minimum and maximum total order size, to satisfy stochastic demand. A continuous review system that implements the order quantity, reorder point (Q, R) inventory policy is considered in the proposed model. The objective is to select suppliers and to determine the optimal inventory policy that coordinates stock levels between each echelon of the systems while properly allocating orders among selected suppliers to maximize the expected profit. The model is solved by decomposing the mixed integer nonlinear programming model into two sub-models. Numerical experiments are conducted to evaluate the model and some managerial insights are obtained with sensitivity analysis.

Suggested Citation

  • Guo, Cong & Li, Xueping, 2014. "A multi-echelon inventory system with supplier selection and order allocation under stochastic demand," International Journal of Production Economics, Elsevier, vol. 151(C), pages 37-47.
    • Handle: RePEc:eee:proeco:v:151:y:2014:i:c:p:37-47
    DOI: 10.1016/j.ijpe.2014.01.017
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    6. Aly Owida & P.J. Byrne & Cathal Heavey & Paul Blake & Khaled S. El-Kilany, 2016. "A simulation based continuous improvement approach for manufacturing based field repair service contracting," International Journal of Production Research, Taylor & Francis Journals, vol. 54(21), pages 6458-6477, November.
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    10. Sourour Aouadni & Jalel Euchi, 2022. "Using Integrated MMD-TOPSIS to Solve the Supplier Selection and Fair Order Allocation Problem: A Tunisian Case Study," Logistics, MDPI, vol. 6(1), pages 1-18, January.
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    13. Li, Xin & Ventura, José A. & Venegas, Bárbara B. & Kweon, Sang Jin & Hwang, Seong Wook, 2018. "An integrated acquisition policy for supplier selection and lot sizing considering total quantity discounts and a quality constraint," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 119(C), pages 19-40.
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