Single or Multiple Sourcing: An integrated Optimization Framework for Sustaining Time-Based Competitiveness

This paper establishes an integrated framework that incorporates significant factors from the literature to date into joint decisions of sourcing and lot sizing. As many winning companies are switching from doing business with many suppliers to few suppliers, selecting competitive suppliers and maintaining time-based competitiveness have become more and more important. We develop an optimization procedure that can be conveniently implemented on a spreadsheet to determine the optimal number of sources and the lot size. Our sensitivity analysis shows that the impact of transportation on the sourcing and lot sizing decisions is significant.