MULTI-VENDOR SOURCING IN A RETAIL SUPPLY CHAIN*

NARENDRA AGRAWAL, STEPHEN A. SMITH, ANDY A. TSAY

Production and Operations Management · 2002 · Volume 11 · Issue 2

DOI: 10.1111/j.1937-5956.2002.tb00489.x

Abstract

This paper describes a methodology for managing capacity, inventory, and shipments for an assortment of retail products produced by multiple vendors. The vendors differ in lead times, costs, and production flexibility. Product demand is uncertain and fluctuates over time. We develop an optimization model to choose the production commitments that maximize the retailers expected gross profit, given demand forecasts and vendors capacity and flexibility constraints. The model has been incorporated into a decision support system, developed in collaboration with supply chain planners at a global retailer of seasonal and fashion merchandise. The software has been tested by two major retailers.

Keywords

SUPPLY CHAIN MANAGEMENT, CAPACITY PLANNING, VENDOR MANAGEMENT, SOURCING STRATEGY, STOCHASTIC PROGRAMMING.

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