A new multi objective supplier selection model by incorporating contract breach option and inventory management consideration

Nowadays, outsourcing has become more popular among multi-nation enterprise organization as the result of current trend toward globalization. This has led firms to give more importance to the purchasing functions, tactics and its associated decisions. One of those decisions which drastically impact all firms’ supporting areas is the supplier selection. Although plenty of researchers have addressed this problem and its different options, there is just a little works on contracting process decisions in selecting suppliers. In this paper we consider a new aspect of this problem that may sometimes occur in global business which is contract termination or breach of a contract with one or some of the potential suppliers. Also we consider a new objective function that is discussed recently, which is maximizing total value of purchasing items from suppliers. A new multi objective mathematical model is presented and it is solved for some test problems by using GAMS software and augmented ϵ -constraint method. The Pareto frontier is plotted for those test problems. A PSO algorithm is used to solve the problem and the results compare with each others.

Keywords:

Contract breach , Supplier selection , Particle swarm optimization , Pareto optimal frontier