OPTIMAL SUPPLY CONTRACT DESIGN WITH MULTIPLE SUPPLIERS UNDER SUPPLY AND DEMAND RISKS

 

Atilla Yalçın, Christian Wolf

 

Abstract

 

We consider a decision problem where a buyer has to decide how to design supply contracts with multiple suppliers. Each supply contract with a supplier consists of a fixed and flexible volume agreement which incurs different costs. The fixed part of the supply contract is linear pricing scheme with discounts whereas the flexible part is a supply option agreement. The buyer can choose to implement a single sourcing strategy or to run a multiple sourcing strategy with different supplier flexibilities. This is especially important in cases where supply and demand risks exist. We provide a stochastic linear programming model formulation and show how it can be implemented by Flop C++. Furthermore we give some numerical illustrations.

 

Lecture Notes in Management Science (2011) Vol. 3: 365-376

3rd International Conference on Applied Operational Research, Proceedings

© Tadbir Operational Research Group Ltd. All rights reserved.

www.tadbir.ca

 

ISSN 2008-0050 (Print)

ISSN 1927-0097 (Online)

 

ARTICLE OUTLINE

 

·         Introduction

·         Literature Review

·         Model Formulation

·         Implementation  

·         Numerical Illustration

·         Scenario Definition

·         Numerical Results

·         Conclusion

·         References

·         Appendix

 

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