A mathematical modeling approach to the integrated supplier selection and lot sizing problem

Abstract

This study analyzes the integrated supplier selection and lot sizing problem of an international automotive supply industry company owning more than one production facility and supplier. A mathematical model is constructed to solve this problem which is very important for the competitiveness of the company. The aim of this study is to select the most appropriate local or global suppliers and to determine the lot sizes based on the production facility and product. The products are divided into two groups: complex and simple; and the suppliers are divided into three groups: local, strategic, and challenger. Only the simple products can be supplied from local suppliers. Local suppliers offer a quantity discount, whereas strategic and challenger suppliers offer a rebate based on the total value of the order. The objective function of the mathematical model is to minimize the total costs of the supply chain. The mathematical model is solved and the results are discussed.