Fuzzy Multi-Objective Order Allocation Model for Risk Management in a Supply Chain

Abstract

Order allocation is one of the most critical activities of purchasing management in a supply chain. It is an unequally important multiple criteria decision making problem including cost, quality, delivery and service etc. In real situation, much input information is uncertain. In these cases the theory of fuzzy sets and stochastic theory are two of the best tools for handling this problem. Our fuzzy model that is formulated in such a way as to simultaneously consider the imprecision of information and stochastic demand, determine the order quantities to each supplier based on price breaks. The problem includes the three objective functions: minimizing the cost, minimizing the net rejected items, and minimizing the net late deliveries, while satisfying capacity and demand requirement constraints. In order to solve the problem, a fuzzy linear/nonlinear programming and scenario analysis are developed. Finally, a numerical example is given to illustrate the proposed model.