Piece-wise Objective Optimization Model for Inventory Control Integrated With Supplier Selection Considering Discount

Abstract

This research proposes a mathematical model in a piecewise objective integer with quadratic programming to accommodate discount in purchase, holding and transport costs on an integrated inventory control and supplier selection problem. The proposed model can be used to determine the optimal decision, specifically, the quantity of product ordered by the decision maker and the quantity stored in the inventory should have minimal effect on the total cost. To evaluate and illustrate how the proposed model could be used to solve the problem, a numerical experiment was performed involving four suppliers with three types of product. According to the results, the model helped in making optimal decisions, specifically, the optimal product volume ordered from each supplier at each period and the product volume stored in the inventory followed the reference level decided by the decision maker.