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No 979:
A Note on 'Sourcing Decisions with Stochastic Supplier Reliability and Stochastic Demand'

Christian Van Delft () and Jean-Philippe Vial ()

Abstract: Burke, Carillo and Vakharia [2009] consider a class of single product sourcing problems with a stochastic demand and multiple uncertain suppliers. Assuming that the demand is independent of the supplier reliabilities and uniformly distributed, they propose to write the expected profit as a quadratic function and derive a closed form expression for the optimal orders. We show that this formula is true only under special circumstances, which are not satisfied in many practical situations of interest. We give an exact formulation and solution procedure, holding under general assumptions. We illustrate our point by a complementary analysis of the numerical examples given in the quoted paper

Keywords: product sourcing; stochastic demand; suppliers; demand; sourcing; (follow links to similar papers)

JEL-Codes: G00; (follow links to similar papers)

15 pages, April 1, 2013

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