Order allocation for multi-item sourcing with supply disruptions in shipment quality and delivery

Abstract

This study outlines a mixed integer nonlinear programming formulation for supplier selection and order allocation in a multiple-item, multiple-supplier sourcing environment. The supplier selection process is driven by the multiple objectives of minimising total purchasing costs, rejections, and late deliveries, along with the constraints of demand, capacity, and price discounts. To reflect a wide variety of operational conditions, four cases of imperfect shipment quality have been developed in this study to analyse their impacts on the total cost. A numerical example was provided to demonstrate the effectiveness of the proposed model in establishing trade-offs among objectives. Sensitivity analysis has been carried out to understand the effects of the model parameters on the purchasing decisions and the total purchasing cost.

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