Composite sourcing policy considering raw-material consumption

Abstract

In this paper, we study a composite sourcing policy considering raw-material consumption so as to maximise the expected total profit while considering mixed strategy for sourcing policy with the lot-sizing issue for multiple products. It is proved that the optimal mixed strategy considering the consumption of raw materials has a property for strong local maximum. Using this property, we propose the economical sourcing policy while considering the relevant cost for raw material management. We analyse and illustrate the behaviours of economical sourcing policy by numerical examples. For future research, it is necessary to take into account both quality issue of supplied items with different production modes and scheduling issue between intermediate inputs and finished goods along supply chain stages.