A Note on ‘Sourcing Decisions with Stochastic Supplier Reliability and Stochastic Demand’

A Note on ‘Sourcing Decisions with Stochastic Supplier Reliability and Stochastic Demand’

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Article ID: iaor201529041
Volume: 24
Issue: 10
Start Page Number: 1636
End Page Number: 1639
Publication Date: Oct 2015
Journal: Production and Operations Management
Authors: ,
Keywords: supply & supply chains, stochastic processes, demand, quality & reliability
Abstract:

This note complements the study of Burke, Carillo, and Vakharia ( hereafter ‘BCV’) which analyzes a class of single‐product multisourcing problems under stochastic demand and random yields. The purpose is twofold. First, we prove that the objective function used by these authors is only a lower bound for the expected profit for which we provide the correct expression. Second, we show on some of the numerical instances provided in BCV's study that the structure and the performance of the BCV ordering policy may be substantially different from the optimal ordering policy. We conclude by giving general qualitative insights characterizing suboptimality of the BCV solution.

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