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MSC,MBA(IT)
Standford
Jun-1997 - Sep-2000
IT Manager
Honeywell
Aug-2001 - Present
6.11Â Â Â Â Â Consider an order allocation problem under multiple sourcing, where it is required to buy 2000 units of a certain product from three different suppliers. The fixed set-up cost (independent of the order quantity), variable cost (unit price), and the maximum capacity of each supplier are given in the following (two suppliers offer quan- tity discounts):
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Supplier   Fixed Cost    Capacity                        Unit Price
1 |
$100 |
600 units |
$ 10/unit for the first 300 units |
 |
 |
 |
$7/unit for the remaining 300 units |
2 |
$500 |
800 units |
$2/unit for all 800 units |
3 |
$300 |
1200 units |
$6/unit for the first 500 units |
 |
 |
 |
$4/unit for the remaining 700 units |
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Criteria
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Sub criteria
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FIGURE 6.8
Supplier selection criteria and sub-criteria (Exercise  6.12).
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The objective is to minimize the total cost of purchasing (fixed plus variable cost). Formulate this as a linear integer-programming problem. You must define all your variables clearly, write out the constraints to be satisfied with a brief explanation of each and develop the objective function.
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