Supplier Selection With Total Quantity Discount Policy And Activation Costs Under Uncertainty: A Case Study Of Abc Company

Abstract

This research delves deeply into the complexities of the Capacitated Supplier Selection problem, with a specific focus on integrating the Total Quantity Discount policy and Activation Costs in the procurement process. The study addresses uncertainties arising from Stochastic prices and Stochastic demands, which are prevalent in real-world scenarios. To effectively handle such uncertainties, we propose a two-stage Stochastic Programming formulation with recourse. Our approach carefully considers both strategic and operational decisions, adapting the general model and recourse actions to accommodate the stochastic nature of the problem. By doing so, we can make robust and reliable supplier selection decisions in the face of uncertainty. To validate the proposed approach, we conduct extensive experimentation on a diverse set of instances. The results demonstrate the superiority of explicitly considering uncertainty over traditional methods based on expected values. This provides valuable managerial insights, enabling companies to make well-informed decisions in the procurement process. However, dealing with stochastic elements introduces computational challenges. To overcome this, we present a branch-and-cut solution framework, leveraging valid inequalities and other acceleration mechanisms to efficiently handle a sufficiently large number of scenarios