Abstract
The integrated procurement, production and distribution planning (IPPDP) problem consists of multiple suppliers who supply raw materials to multiple plants to produce a single product to meet the demand in multiple time horizons. The present research focuses on the analysis of the effect of backorders on the IPPDP problem in a three-echelon supply chain that consists of suppliers, manufacturers and retailers. The IPPDP problem is formulated as a mixed integer linear programming (MILP) model and the optimal solution is obtained with the solver LINGO. The total net profit obtained for the scenario involving lost sales is compared with that for the scenario which involves lost sales and backordering. For a set of problem instances, an increase of 10.29% in the average total net profit and 4.80% in the average fill rate is obtained for the lost sales and backordering scenario compared to the lost-sales-only scenario.
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