Order allocation to cluster suppliers considering supply failure, multiple price discount, and supplier maintenance cost

Abstract

With increasing geographical proximity within supply chain networks, the development of decision models for ordering materials from co-located cluster suppliers under the broad rubric of risk management in supply chains becomes an important problem given that geographic-specific regional failure with its associated loss is inevitable. This paper proposes a model that optimizes the supplier order allocation of demand among clusters under supply failure risks. The total purchase costs are formulated with supplier maintenance costs, item purchase costs, and the losses incurred due to three types of events in a level of generalization. The proposed model is a general nonlinear programming problem and coded in MATLAB to facilitate the search for the optimal solution with a smaller allocation multiples of 1%. Finally, in an application case, we demonstrated the proposed model’s potential of application.

Keywords:

• cluster suppliers
• supplier allocation
• supply failure risk
• regional failure
• MATLAB

Disclosure statement

No potential conflict of interest was reported by the author.