Supplier diversification and ordering policy under yield randomness in inventory models

摘要

In this paper we consider supplier diversification in inventory models with multiple suppliers and random yields. We attempt to determine the optimal order quantities and expected long-run average cost from multiple suppliers with different yields and prices. We provide the mathematical formulation for cost nunimization problem and show that the total annual cost function is convex. Numerical example is performed to provide some insights for supplier selection and lot sizing decisions. A sensitivity analysis of the optimal solution to these parameters is carried out. Managerial implications are also included.