Supplier selection based on market characteristics under price, service level, and lead time dependent demand

摘要

This paper models the product/service demand as a function of attributes including price, guaranteed delivery time, and service level for the profit maximization. One supplier could be characterized by its performances in cost, delivery time, and/or service level. The service level is a function of the guaranteed delivery time under stochastic delivery time. Results show that the service level is not always binding at the predetermined value set by a manager or the market, although the service level is assumed to be binding at optimality in literature. Results illustrate that operation performances of the supplier selected and market characteristics have significant impacts on optimal solutions of price, guaranteed delivery time, and service level. Results imply that operation performances of the supplier chosen should be matched with market characteristics. Consequently, an integrated approach of customer-oriented supplier selection is proposed for better profitability.