A model for Order Allocation in Multi Supplier, Multi Product and Multi Period Situation, Considering Incremental Discounts

In most industries the cost of raw materials and component parts constitutes almost 60% percent of cost of a product (in some industriesup to 80%). In this situation, proper sourcing can play a key role in an organization's efficiency and effectiveness, because it has a direct effect on cost reduction, profitability and flexibility of a company. In this paper, determining the optimal order quantity in multi supplier, multi product and during several periods, allowing shortage and surplus, in presence of incremental discounts, and considering multi objective and multi criteria nature of the problem, is considered. Demand of each product i in period t is assumed to be known. To incorporate the effective criteria, analytic network process approach is used. After developing the multi objective mixed integer programming, a numerical exampleis presented. Result shows that decision maker can select right set of suppliers, so that in addition to minimize total cost, lead time, and reject rate, maximize the utility function. At the end, results and suggestion will be provided.