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Optimal sourcing policies for single and multiple period scenarios

Author

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  • Shantanu Shankar Bagchi
  • A.K. Rao

Abstract

Determining the optimum number of suppliers and the optimum quantities to order from each of them is a critical problem for any supply chain. The objective of this paper is to identify the optimal sourcing policy of a retailer for the single and multi-period context when the firm can source its order to multiple suppliers along with a back-up supplier for the emergency situations. The expected total profit is mathematically modelled for single and multi-period scenarios. The optimal sourcing policy is obtained by maximising the expected total profit with respect to the order quantities. Closed form solution is obtained for uniformly distributed demand for both single and multi-period scenarios. It is observed that the multi-period solution is less sensitive compared to the single-period solution. Also it is found that it is optimal for the firm to lessen the amount of supplier diversification in case of planning for multiple periods.

Suggested Citation

  • Shantanu Shankar Bagchi & A.K. Rao, 2020. "Optimal sourcing policies for single and multiple period scenarios," International Journal of Operational Research, Inderscience Enterprises Ltd, vol. 38(2), pages 166-192.
    • Handle: RePEc:ids:ijores:v:38:y:2020:i:2:p:166-192
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