A Model and an Algorithm for a Large-Scale Sustainable Supplier Selection and Order Allocation Problem

Abstract

We consider a buyer's decision problem of sustainable supplier selection and order allocation (SSS & OA) among multiple heterogeneous suppliers who sell multiple types of items. The buyer periodically orders items from chosen suppliers to refill inventory to preset levels. Each supplier is differentiated from others by the types of items supplied, selling price, and order-related costs, such as transportation cost. Each supplier also has a preset requirement for minimum order quantity or minimum purchase amount. In the beginning of each period, the buyer constructs an SSS & OA plan considering various information from both parties. The buyer's planning problem is formulated as a mathematical model, and an efficient algorithm to solve larger instances of the problem is developed. The algorithm is designed to take advantage of the branch-and-bound method, and the special structure of the model. We perform computer experiments to test the accuracy of the proposed algorithm. The test result confirmed that the algorithm can find a near-optimal solution with only 0.82 percent deviation on average. We also observed that the use of the algorithm can increase solvable problem size by about 2.4 times.