Volume 22, Number 2 (IJIEPR 2011)                   IJIEPR 2011, 22(2): 135-141 | Back to browse issues page


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Nosoohi I, Mollaverdi N. Modeling of Capacity Reservation and Supplier Selection Based on Option Contract. IJIEPR. 2011; 22 (2) :135-141
URL: http://ijiepr.iust.ac.ir/article-1-292-en.html

Department of industrial engineering, Isfahan University of Technology (IUT) , naserm@cc.iut.ac.ir
Abstract:   (4230 Views)

 

  Capacity Reservation,

  Option Contract,

  Supplier Selection

A key issue for manufacturing firms is planning for outsourced components. In this research, we have considered a manufacturer in a Make-to-Order production environment who has to outsource a special component from a set of suppliers. One selling season is considered and the manufacturer faces uncertain demand during the selling season. A good strategy for the manufacturer to balance both holding and lost sale costs is to initiate capacity reservation contracts with his suppliers. Thus, unlike the previous researches we have presented a mathematical model based on option mechanism that will help the manufacturer to select appropriate suppliers and order allocation, simultaneously. The considered option mechanism has a two part contract fee structure (option price and exercise price) and it is at the foundation of practical contracts used by different industries. A numerical example is used to illustrate the model and to investigate how option mechanism improves manufacturer's expected profit in comparison with the situation without applying the option mechanism .

Full-Text [PDF 233 kb]   (1918 Downloads)    
Type of Study: Research | Subject: Other Related Subject
Received: 2011/07/19

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