Multi-objective optimisation of risk and business strategy in real-world supply networks in the presence of uncertainty

Abstract

Selection of suppliers is very important for a strategic supply network (SN) design. This paper presents a novel multi-objective optimisation model for supplier selection and order allocation. In addition to a standard objective of total SN cost minimisation, two new objectives are considered: minimisation of suppliers’ risk and maximisation of achievement of a manufacturer business strategy. Uncertainty in supply lead times and non-conformance rates of delivered components causes uncertainty in the SN cost objective. These parameters are described using imprecise linguistic terms and modelled using fuzzy numbers. Risk classification of suppliers is carried out using imprecise knowledge which is modelled using fuzzy If-Then rules and embedded in the risk objective. Various experiments are carried out to analyse the trade-off between the considered objectives and the impact of SN network parameters on the suppliers’ selection and order allocation. The size of the problem that the model can handle is analysed also.