A simulation-optimizationapproachforintegratedsourcing and inventorydecisions

In thispaper,westudyageneralizedvendorselectionproblemthatintegratesvendorselectionand inventoryreplenishmentdecisionsofafirm.Inadditiontovendor-specificprocurementand managementcosts,weconsiderinventoryreplenishment,holding,andbackordercostsexplicitlyto meet stationarystochasticdemandfacedbythefirm.Ourgoalistoselectthebestsetofvendorsalong with theoptimuminventorydecisionsateachplantofthefirmsothatweminimizethesystem-wide total costsandachievedesiredserviceandreliabilitylevels.Duetouncertaintiesinherentinthe problemrelatedtodemandobservedbythefirm,qualityprovidedbyvendors,anddisruptions observedbyvendors,weutilizeasimulation-optimizationapproachtosolvetheproblem.More specifically,webuildadiscrete-eventsimulationmodeltoevaluatetheobjectivefunctionofthe problemthatworksinconcertwithascattersearch-basedmetaheuristicoptimizationapproachto search thesolutionspace.Computationalresultsnotonlyprovidemanagerialinsightsandmeasurethe significanceofintangiblefactorsinthevendorselectionprocessbutalsohighlighttheimportanceof computationaltoolssuchassimulation-optimizationforthevendorselectionproblem.