Optimal sourcing from alternative capacitated suppliers with general cost structures
Most manufacturers or retailers must procure items or services necessary for their businesses, in an environment that typically includes a number of competing suppliers with varying cost structures, price schemes, and capacities. In this paper, we consider the sourcing problem in which the buyer det...
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| Vydané v: | Omega (Oxford) Ročník 58; s. 26 - 32 |
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01.01.2016
Pergamon Press Inc |
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| ISSN: | 0305-0483, 1873-5274 |
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| Abstract | Most manufacturers or retailers must procure items or services necessary for their businesses, in an environment that typically includes a number of competing suppliers with varying cost structures, price schemes, and capacities. In this paper, we consider the sourcing problem in which the buyer determines the sources that should be utilized and to what extent, in turn, dictating the total quantity available for the buyer to sell/utilize, subject to stochastic demand/requirement. Our approach advocates not to determine the quantity to be sourced a priori. We allow for capacitated sources and any cost structure in which fixed costs and quantity discounts are special cases. Some simpler versions of this problem are shown to be NP-hard in the literature. By proving that the order of the sources is irrelevant for the optimal solution, we devise a dynamic programming model with pseudo-polynomial complexity to solve the multiple supplier sourcing problem to optimality. We propose two extensions: one limits the number of suppliers, and the other allows multi-period sourcing.
•We solve the sourcing problem under general cost structures and stochastic demand.•We provide an exact pseudo-polynomial algorithm.•Procurement quantity might decrease when there are additional suppliers.•Our model allows for introducing supplier restrictions and multi-period sourcing. |
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| AbstractList | Most manufacturers or retailers must procure items or services necessary for their businesses, in an environment that typically includes a number of competing suppliers with varying cost structures, price schemes, and capacities. In this paper, we consider the sourcing problem in which the buyer determines the sources that should be utilized and to what extent, in turn, dictating the total quantity available for the buyer to sell/utilize, subject to stochastic demand/requirement. Our approach advocates not to determine the quantity to be sourced a priori. We allow for capacitated sources and any cost structure in which fixed costs and quantity discounts are special cases. Some simpler versions of this problem are shown to be NP-hard in the literature. By proving that the order of the sources is irrelevant for the optimal solution, we devise a dynamic programming model with pseudo-polynomial complexity to solve the multiple supplier sourcing problem to optimality. We propose two extensions: one limits the number of suppliers, and the other allows multi-period sourcing.
•We solve the sourcing problem under general cost structures and stochastic demand.•We provide an exact pseudo-polynomial algorithm.•Procurement quantity might decrease when there are additional suppliers.•Our model allows for introducing supplier restrictions and multi-period sourcing. Most manufacturers or retailers must procure items or services necessary for their businesses, in an environment that typically includes a number of competing suppliers with varying cost structures, price schemes, and capacities. In this paper, we consider the sourcing problem in which the buyer determines the sources that should be utilized and to what extent, in turn, dictating the total quantity available for the buyer to sell/utilize, subject to stochastic demand/requirement. Our approach advocates not to determine the quantity to be sourced a priori. We allow for capacitated sources and any cost structure in which fixed costs and quantity discounts are special cases. Some simpler versions of this problem are shown to be NP-hard in the literature. By proving that the order of the sources is irrelevant for the optimal solution, we devise a dynamic programming model with pseudo-polynomial complexity to solve the multiple supplier sourcing problem to optimality. We propose two extensions: one limits the number of suppliers, and the other allows multi-period sourcing. |
| Author | Tan, Tarkan Alp, Osman |
| Author_xml | – sequence: 1 givenname: Tarkan surname: Tan fullname: Tan, Tarkan email: t.tan@tue.nl organization: School of Industrial Engineering, Eindhoven University of Technology, P.O. Box 513, 5600MB Eindhoven, The Netherlands – sequence: 2 givenname: Osman surname: Alp fullname: Alp, Osman email: osman.alp@tedu.edu.tr organization: Department of Industrial Engineering, TED University, 06420 Ankara, Turkey |
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| Title | Optimal sourcing from alternative capacitated suppliers with general cost structures |
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