Inventory replenishment decisions model for the supplier selection problem facing low perfect rate situations

Abstract

This article addresses the supplier selection and order quantity allocation problem. It introduces a model to minimize the total cost per time unit considering inventory and transportation costs. In selecting suppliers, two feasibility constraints are considered: capacity and perfect rate. The acceptable perfect rate of raw materials is ensured with a mathematical inequality in the model constraints. The proposed model addresses the desired perfect rate by including it as part of the order cycle parameters calculation and not as an individual constraint. Two main advantages of the proposed model are: (i) it leads to lower cost solutions compared to an existing model; and (ii) it effectively faces the low perfect rate situation, by providing feasible solutions when the perfect rate of suppliers is smaller than the minimum acceptable perfect rate required by the customer. A sensitivity analysis was carried out on the proposed model to analyze the effect of some parameters on the total cost per time unit. Results showed that transportation costs have an important effect on the order quantity and, also, that price levels do not necessarily affect the amount of purchased units. Hence the importance of considering transportation costs when making order quantity allocation decisions.