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Sole versus dual sourcing under order dependent lead times and prices

Sajadieh, M. S ; Sharif University of Technology

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  1. Type of Document: Article
  2. DOI: 10.1016/j.cor.2009.03.001
  3. Abstract:
  4. In this paper, we consider a dual-sourcing model with constant demand and stochastic lead times. Two suppliers may be different in terms of purchasing prices and lead-time parameters. The ordering takes place when the inventory level depletes to a reorder level, and the order is split among two suppliers. Unlike previous works in the order splitting literature, the supply lead time between vendor and buyer as well as unit purchasing prices is considered to be order quantity dependent. The proposed model finds out the optimal reorder point, order quantity and splitting proportion, using a solution procedure. Numerical results show that neglecting the relationship between ordering batch size and lead times is a shortcoming that hides one of order splitting advantages. Moreover, connecting unit prices to order quantity can decrease the percentage saving from dual sourcing compared to sole sourcing. Furthermore, sensitivity analysis shows some managerial insights. © 2009 Elsevier Ltd. All rights reserved
  5. Keywords:
  6. Stochastic lead times ; Batch sizes ; Dual sourcing ; Inventory levels ; Lead time ; Numerical results ; Order quantity ; Order splitting ; Reorder points ; Solution procedure ; Unit prices ; Costs ; Random processes ; Sales ; Sensitivity analysis ; Stochastic models ; Supply chains ; Supply chain management
  7. Source: Computers and Operations Research ; Volume 36, Issue 12 , 2009 , Pages 3272-3280 ; 03050548 (ISSN)
  8. URL: https://www.sciencedirect.com/science/article/pii/S0305054809000707