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- Title
RATIONALIZATION OF THE SUPPLIER BASE IN THE PRESENCE OF YIELD UNCERTAINTY.
- Authors
Agrawal, Narendra; Nahmias, Steven
- Abstract
The article discusses the rationalization of the supplier base in the presence of yield uncertainty. It states that an important aspect of supply chain management is the optimal configuration of the supplier base. Researchers developed a model for optimizing the number of suppliers in the presence of yield uncertainty. This study also adds to the small literature that incorporates yield randomness into a multi-supplier framework. Because of the multiplicative model of yield, larger orders have higher yield variance. This effect favors smaller orders from many suppliers. However, fixed costs associated with each supplier provide a penalty for having too many suppliers. Hence, there will exist an optimal number that balances these two competing objectives. Researchers showed that the optimal lot size in the case of identical suppliers can be determined from a formula similar to the newsboy, but with some interesting differences. These differences are due to the uncertainty on the supply side rather than on the demand side.
- Subjects
SUPPLY &; demand; SUPPLY-side economics; PRODUCTION management (Manufacturing); INDUSTRIAL costs; OVERHEAD costs; SUPPLIERS; BUSINESS logistics
- Publication
Production & Operations Management, 1997, Vol 6, Issue 3, p291
- ISSN
1059-1478
- Publication type
Article
- DOI
10.1111/j.1937-5956.1997.tb00432.x