Modeling of Purchase and Sales Contracts in Supply Chain Optimization

Abstract

This work presents a novel approach for modeling of different types of contracts that a company may sign with its suppliers and customers. The main objective is to expand the scope of current planning and supply chain optimization models by including the selection of the types of contracts as an additional decision. The solution approach relies on representing the decision of choosing different contracts using disjunctive programming for both short-term and long-term production planning models. The resulting formulation is converted into a mixed-integer linear programming (MILP) problem. The advantages of the proposed models are highlighted in two case studies of increasing complexity.

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