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Article: Coordinating two suppliers with offsetting lead time and price performance

TitleCoordinating two suppliers with offsetting lead time and price performance
Authors
Issue Date1994
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jom
Citation
Journal Of Operations Management, 1994, v. 11 n. 4, p. 327-337 How to Cite?
AbstractFor a variety of reasons, many firms purchase a given inventory item from two or more suppliers. For a situation where two competing suppliers (supplier-1 and supplier-2) offer different prices, quality levels and lead-time performance, we present a decision model and solution procedure for obtaining a lowest-cost ordering policy; this policy prescribes R* (the optimal reorder point), Q* (the optimal lot size for each order), and r2 * (the optimal proportion should be ordered from supplier-2). A continuous-review inventory system with complete backordering is assumed. Our decision model has two parts. The first part uses a minor modification of the classical Hadley-Whitin single-supplier continuous review (Q, R) model to determine the optimal ordering policy (i.e., Q* and R*) when only supplier-1 (or only supplier-2) is used. In the second part, a new two-supplier extension of the Hadley-Whitin-type cost model developed here is used to determine the optimal policy (i.e., Q*, R* and r2 *) when both suppliers have to be used. From the three optimal policies (one each for "using supplier-1 only", "using supplier-2 only", and "using both suppliers"), the lowest-cost policy is identified. Our numerical solutions show that whether one or both of the suppliers should be used and the optimal order-split proportion depends on the particular combination of the inventory item's many cost and demand parameters (e.g., shortage cost per unit, holding cost per unit per year, standard deviation of lead time, etc.). Our procedure can easily identify the optimal policy for any given combination of those parameters. Our numerical sensitivity analyses indicate that the coordination of two suppliers is beneficial in a wide variety of situations where the various inventory parameters have intermediate (i.e., neither very high nor very low) values. © 1994.
Persistent Identifierhttp://hdl.handle.net/10722/177840
ISSN
2015 Impact Factor: 4.0
2015 SCImago Journal Rankings: 5.052

 

DC FieldValueLanguage
dc.contributor.authorLau, HSen_US
dc.contributor.authorLau, AHLen_US
dc.date.accessioned2012-12-19T09:40:32Z-
dc.date.available2012-12-19T09:40:32Z-
dc.date.issued1994en_US
dc.identifier.citationJournal Of Operations Management, 1994, v. 11 n. 4, p. 327-337en_US
dc.identifier.issn0272-6963en_US
dc.identifier.urihttp://hdl.handle.net/10722/177840-
dc.description.abstractFor a variety of reasons, many firms purchase a given inventory item from two or more suppliers. For a situation where two competing suppliers (supplier-1 and supplier-2) offer different prices, quality levels and lead-time performance, we present a decision model and solution procedure for obtaining a lowest-cost ordering policy; this policy prescribes R* (the optimal reorder point), Q* (the optimal lot size for each order), and r2 * (the optimal proportion should be ordered from supplier-2). A continuous-review inventory system with complete backordering is assumed. Our decision model has two parts. The first part uses a minor modification of the classical Hadley-Whitin single-supplier continuous review (Q, R) model to determine the optimal ordering policy (i.e., Q* and R*) when only supplier-1 (or only supplier-2) is used. In the second part, a new two-supplier extension of the Hadley-Whitin-type cost model developed here is used to determine the optimal policy (i.e., Q*, R* and r2 *) when both suppliers have to be used. From the three optimal policies (one each for "using supplier-1 only", "using supplier-2 only", and "using both suppliers"), the lowest-cost policy is identified. Our numerical solutions show that whether one or both of the suppliers should be used and the optimal order-split proportion depends on the particular combination of the inventory item's many cost and demand parameters (e.g., shortage cost per unit, holding cost per unit per year, standard deviation of lead time, etc.). Our procedure can easily identify the optimal policy for any given combination of those parameters. Our numerical sensitivity analyses indicate that the coordination of two suppliers is beneficial in a wide variety of situations where the various inventory parameters have intermediate (i.e., neither very high nor very low) values. © 1994.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jomen_US
dc.relation.ispartofJournal of Operations Managementen_US
dc.titleCoordinating two suppliers with offsetting lead time and price performanceen_US
dc.typeArticleen_US
dc.identifier.emailLau, AHL: ahlau@business.hku.hken_US
dc.identifier.authorityLau, AHL=rp01072en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.doi10.1016/S0272-6963(97)90003-6-
dc.identifier.scopuseid_2-s2.0-0028400389en_US
dc.identifier.volume11en_US
dc.identifier.issue4en_US
dc.identifier.spage327en_US
dc.identifier.epage337en_US
dc.publisher.placeNetherlandsen_US
dc.identifier.scopusauthoridLau, HS=7201497264en_US
dc.identifier.scopusauthoridLau, AHL=7202626080en_US

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