Supplier selection and order lot sizing using dynamic programming

Abstract

In this paper, we consider a multi-period integrated supplier selection and order lot sizing problem where a single buyer plans to purchase a single product in multiple periods from several qualified suppliers who are able to provide the required product with the needed quality in a timely manner.Product price and order cost differs among different suppliers.Buyer's demand for the product is deterministic and varies for different time periods.The problem is to determine how much product from which supplier must be ordered in each period such that buyer's demand is satisfied without violating some side constraints.We have developed a mathematical programming model to deal with this problem, and proposed a forward dynamic programming approach to obtain optimal solutions in reasonable amount of time even for large scale problems.Finally, a numerical example is conducted in which solutions obtained from the proposed dynamic programming algorithm is compared with solutions from the branch-and-bound algorithm.Through the numerical example we have shown the efficiency of our algorithm.

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