Optimal multi-period supplier selection and order allocation in a multi-product supply chain incorporating customer flexibility

Abstract

Efficient and effective supplier selection and order allocation are important issues to be considered for designing flexible and highly competitive supply chains which maximize the manufacturer's total profit and ensure stable material flows. This paper proposes a novel methodology for solving an integrated supplier selection and order allocation problem that arises in the design of a multi-product supply chain, with particular reference to the influence of customer flexibility. A new mixed integer programming model incorporating the characteristics of the problem is developed to assist the manufacturer in the decision making processes. Due to the complexity and the NP-Hard nature of the proposed model, a novel hybrid algorithm based on the strengths of constraint programming (CP) and simulated annealing (SA) is developed to solve this challenging problem. The performance of the proposed algorithm is tested with a set of randomly generated test problems. Comparison with the computational results obtained by ILOG OPL clearly shows that the hybrid algorithm can locate profit-effective solutions with less computational efforts.