A game theoretic model for capacity-constrained supplier selection by considering joint shipment

Supplier selection is one of the most important issues in supply chain management. Recent models in supplier selection are based on total supply chain cost point of view to adjust with growing competition among supply chains.
The joint decision making of procurement lot-size, supplier selection, production decisions and shipment policy selection has potential to reduce total supply chain costs. In this paper, a single-buyer multi-suppliers model in a two level supply chain is presented and a cooperative game theory model is proposed to analyse the decisions. In this regard, the selected suppliers and total supply chain costs are found. We assumed that the selected suppliers’ setup time interval is integer multipliers of the replenishment cycle time of the buyer and also suppliers are able to outsource their remaining capacities. It is shown that the cooperative model could result in a stable solution with same total supply chain cost as the centralized model and also, when suppliers have equal opportunity costs for each single production capacity, selected suppliers are determined independent from the opportunity cost but when the suppliers have different opportunity costs, the selected suppliers are influenced by the opportunity cost that they have. A numerical example describes the findings.