Selection of a dynamic supply portfolio in make-to-order environment withrisks

Abstract

The problem of a multi-period supplier selection and order allocation in make-to-order environment in the presence of supply chain disruption and delay risks is considered. Given a set of customer orders for finished products, the decision maker needs to decide from which supplier and when to purchase product-specific parts required for each customer order to meet customer requested due date at a low cost and to mitigate the impact of supply chain risks. The selection of suppliers and the allocation of orders over time is based on price and quality of purchased parts and reliability of supplies. For selection of dynamic supply portfolio a mixed integer programming approach is proposed to incorporate risk that uses conditional value-at-risk via scenario analysis. In the scenario analysis, the low-probability and high-impact supply disruptions are combined with the high probability and low impact supply delays. The proposed approach is capable of optimizing the dynamic supply portfolio by calculating value-at-risk of cost per part and minimizing expected worst-case cost per part simultaneously. Numerical examples are presented and some computational results are reported.