RATIONALIZATION OF THE SUPPLIER BASE IN THE PRESENCE OF YIELD UNCERTAINTY

Narendra Agrawal and Steven Nahmias

Production and Operations Management, 1997, vol. 6, issue 3, 291-308

Abstract: An important aspect of supply chain management is the optimal configuration of the supplier base. We develop a model to determine optimal lot sizes and the optimal number of suppliers when the yield of the product delivered from each supplier is random. While small orders from a large number of suppliers can reduce yield uncertainty, fixed costs associated with each supplier provide a penalty for having too many suppliers. This is the key tradeoff addressed by our model. We look at the cases when the suppliers are identical as well as nonidentical.

Date: 1997
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