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Paper Information

Journal:   SCIENTIA IRANICA   2014 , Volume 21 , Number 3 (TRANSACTIONS E: INDUSTRIAL ENGINEERING); Page(s) 1034 To 1043.
 
Paper: 

RISK ANALYSIS OF SOURCING PROBLEM USING STOCHASTIC PROGRAMMING

 
 
Author(s):  KEYVANLOO M., KIMIAGARI A.M.*, ESFAHANIPOUR A.
 
* DEPARTMENT OF INDUSTRIAL ENGINEERING AND MANAGEMENT SYSTEMS, AMIRKABIR UNIVERSITY OF TECHNOLOGY, TEHRAN, IRAN
 
Abstract: 

Nowadays, the sourcing problem has become more challenging for supply chain members. Dierent types of sourcing for dierent market conditions are presented in the literature. In this paper, an option contract, as an ecient tool for sourcing, is developed in a multi-period setting in which the price and demand follow two stochastic processes. The sourcing decision is analyzed from a risk neutral and a risk averse decision-maker point of view. This paper applies the stochastic programming approach to model the presented option contract based on price and demand uncertainties. Next, using CVaR as a coherent risk measure, the eects of risk on sourcing problem are studied. By numerical example, using the presented ecient frontier, the simulation results of our developed models show that the decision maker can make a trade-obetween risk and cost associated with the sourcing problem. The paper also performs a sensitivity analysis in order to demonstrate the eects of change in cost parameters on the results of our option model.

 
Keyword(s): SUPPLY CONTRACT, RISK MEASURE, ECIENT FRONTIER, OPTION CONTRACT, UNCERTAIN DEMAND, UNCERTAIN PRICE, STOCHASTIC PROCESS, STOCHASTIC PROGRAMMING
 
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