Impact analysis of flexibility on the integrated lot sizing and supplier selection problem

This paper addresses the integrated capacitated multi-period lot-sizing and supplier selection problem considering backlog. The demand for products is known over a planning horizon, and different products can be purchased from multiple suppliers to meet the order of a set of shortlisted customers. The problem involves a network connecting suppliers, products, and customers. Then, the decision-maker needs to decide what products to purchase in what quantities from the suppliers in each period. The paper analyzes the named value of product acquirement flexibility, where only certain types of products can be delivered by each one of the suppliers. Note that, in practice, it is unusual to use resources that have total (or complete) product acquirement flexibility; in other words, each resource can deliver all products. Therefore, it might be interesting to implement only a limited amount of product acquirement flexibility so that only certain types of products can be delivered by each supplier. Extensive computational experiments showed that benefits can be obtained from the product acquirement flexibility by reducing the number of selected suppliers, which can decrease costs due to the supplier management process simplification and establish a lasting partnership with these suppliers.