Improving the efficiency of iron and steel purchasing using supply chain coordination

In this paper, we investigate the raw materials purchasing problem arising from Shanghai Baoshan Iron and Steel Complex (referred to below as Baosteel). Two novel mathematical programming models are established to simultaneously select suppliers and determine order quantities over a multi-period horizon for multiple items. The objective of the first model is to minimise the purchasing cost of the manufacturer. However, the second one aims to minimise the redundant cost associated with the purchasing process from the perspective of supply chain under the condition that the profits of the suppliers selected are not reduced. Heuristic algorithms are then developed to find high-quality solutions in consideration of the complexity of the models. Computational results have proved the importance of the coordination between manufacturers and suppliers.