Determining Optimal Number of Suppliers in a Multiple Sourcing Model under Stochastic Lead Times

Employing more than one supplier and splitting orders between them is a strategy employed in supply chains to lessen the lead-time risk in unstable environments. In this paper we present a multiple-sourcing inventory system with stochastic lead-times and constant demand controlled by a continuous review, reorder point-order quantity inventory policy. We consider the situation in which the order quantity is equally split between a number of identical suppliers. The aims of this research are to determine the optimal number of suppliers and analyze the percentage savings obtained in a multiple-sourcing system compared to sole-sourcing. The objective function is to minimize the expected total cost per unit time by obtaining the number of suppliers, the reorder point and order quantity as decision variables. Extensive numerical examples are used to examine the effects of different parameters on the percentage savings and the optimal number of suppliers.