Research On The Multiple Sourcing Inventory Control Policy

Mutiple sourcing is the comprehensive utilization of a variety of production or service capacity (supply sources, such as production equipment, production technologies, supply channels, delivery modes, etc) with different characteristics, to meet the market demand of some product or service, in order to acheive higher service levels, lower costs or greater revenue. Different supply sources exhibits different characteristics in the cost structure, supply capacity constraint, supply lead time, delivery reliability and carbon emission. Consequently, multiple sourcing has higher superiority in acheving firms’ goals than single sourcing in most cases. In fact, multiple sourcing has been widely used as a opertional or strategic decision in manufacturing or service firms, production and procurement process, individual firm and supply chain.In maufacturing firms, either producing component parts in-home or purchasing component parts from an outside market is a representative example of multi-sourcing problems. Producing component parts in-home offers the advantage of a lower unit procurement cost, but requires a fixed procurement cost to set up equipment, and is constrained by a maximum order size due to equipment capactity. Buying component parts from an outside market carries with neither a fixed procurement cost nor a maximum order size constraint, but leads to higher unit procurement cost. Producing in-home and purchasing from an outside market can be viewed as two suppliers, which are differentiated based on their cost structures. General procurement modes of firms can be classified into regular procurement and expedited procurement. Regurlar procurement (e.g., procuring materials from a geographically distant global supplier) offers the advantage of a lower unit procurement cost, but is with a longer supply lead time. Expedited procurement (e.g., replenishing materials from a local supplier) incurs a higher unit procurement cost, but has a shorter supply lead time. The differences between regular procurement and expedited procurement are on their supply lead times and unit procurement costs. Under the government’s carbon emission regulation policy, energies with different energy efficiency and green production technologies with different levels employed by firms have different performances on carbon emission and production cost. The energy with higher energy efficiency or the green production technology with higher level incurs lower carbon emissions but higher production costs. In this multi-sourcing problem of finished products, energies and production technologies are differentitated based on their carbon emissions and unit procurement costs.Based on the above three representative examples, this thesis studies the optimal inventory control policies of the dual-sourcing problem with heterogeneous cost structures, the dual-sourcing problem with heterogeneous lead times, and the multi-sourcing problem with heterogeneous carbon emissions, respectively. By developing stochastic dynamic programming models for these representative problems, this thesis characterize the structure or structural properties of discrete-time dynamic procurement and inventory control based on the analysis of properties of objective functions. The main works and innovations of this these are:1. For the dual-sourcing problem with heterogeneous cost structures, this thesis is the first to consider the suppliers’ differences on unit procurement costs, fixed procurement costs, and maximium order size constraints. The cases with lost sales and demand backlogging are studied in this thesis, respectively. For the case with lost sales, this thesis first characterize the structure of the optimal inventory control policy when the unit procurement costs satisfy a certain condition, and then design a heuristic inventory control policy which performs well. For the case with demand backlogging, this thesis first characterize the proprety of supplier selection based on quasi-convexity, and then partially characterize the structure of the optimal inventory control policy based on a proposed preservation property of strong OK-convexity.2. For the dual-sourcing problem with heterogeneous lead times, the existing literature focus on designing the heuristic inventory control policy. This thesis is the first to characterize the sensitivities, and upper and lower bounds of the optimal inventory control policy bases on L-natrural-convexity. Based on these properties, this thesis designs a heuristic inventory control policy which performs better than the policies in the existing lieterature.3. For the multi-sourcing problem with heterogenous carbon emissions, the existing literature focus on the single-period static problems and multi-period dynamic problems with deterministic demands. This theis is among the first to consider the multi-period problem with dynamic stochastic demands. Based on a proposed perservation property of supermodularity, this thesis finds that the optimal inventory control policy follows a composite base-stock structure, and the optimal emission trading policy is a two-threshold target interval policy. Numerical studies indicate that, compared with dual-sourcing, multi-sourcing may save a firm up to10%in total costs.The inventory control policies of multi-sourcing problem are extensive related to logistic services, commodities trading, supply and production quality, marketing and supply chain finance. The reserach problems of this thesis are derived from practice, and our results have the higher theoretical guiding significance and provide a good basis for the research of related issues.