Sourcing with random yields and stochastic demand: A newsvendor approach

We studied a supplier selection problem, where a buyer, while facing random demand, is to decide ordering quantities from a set of suppliers with different yields and prices.We provided the mathematical formulation for the buyer’s profit maximization problem and proposed a solution method based on a combination of the active set method and the Newton search procedure. Our computational study shows that the proposed method can solve the problem efficiently, and is able to generate interesting and insightful results that lead us to various managerial implications. Scope and purpose In today’s globally competitive environment, decision makers in supply chains face numerous challenges particularly regarding the selection of suppliers or outsourcing partners. To assist in this endeavor, we examined a double-layered supply chain where a buyer facing the end users has the option of selecting among a cohort of suppliers. The available suppliers may have different yield rates and unit co...

• Type: Journal
• Year: 2007
• Where: COR
• Authors: Shitao Yang, Jian Yang, Layek Abdel-Malek
• Keywords: COR 2007, COR 2008, Supplier Selection Problem, Suppliers, Supply Chain