Developing a Newsvendor Model based on the Relative Competence of Suppliers and Probable Group Decision-making

Document Type : Research Paper

Authors

1 Ph.D. Candidate, Department of Industrial Management, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran.

2 Associate Prof., Department of Management, Faculty of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad, Iran.

Abstract

Objective: The problem of selecting the suppliers along with their Economic Order Quantity (EOQ) has always been an important issue in the Newsvendor model. Multiple qualitative and quantitative criteria are needed to be regarded for making a better supplier selection while performing trade-offs among them. An approach that can take all criteria into account in the selection of suppliers has not been developed yet in the Newsvendor model. Multiple criteria decision-making (MCDM) can be leveraged to make trade-offs among multiple criteria.
Methods: This study sought to develop a solution to the Newsvendor problem, accounting for the most significant criteria in supplier selection and product reliability so that the total cost of the chain would be minimized in a multi-product and multi-period model with multiple suppliers. This approach adopted the Bayesian Best Worst Method (BWM), which is one of the MCDM methods, to rank the criteria and also implemented the Fuzzy Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) to prioritize the suppliers. Then, the suppliers' weights were used as the proposed model inputs. The results obtained from Bayesian BWM validated the effectiveness of the presented approach. The objective function was set in a way that a retailer's profit and weight value of products considering the ranking of suppliers were maximized. The goal was to find optimal order quantity allocating to suppliers. To convert the multi-objective model to a single-objective, the Lp-metric method was used.
Results: To evaluate the derived model, a case study with real data in the electronic supply chain was investigated. The developed model for the Newsvendor problem could find the best suppliers by considering a combination of qualitative and quantitative criteria in selecting them. In this research, the real-world case study was considered in the electronics industry, which allowed the researchers to make a better evaluation of the model.
Conclusion: The obtained results indicated that the retailer uses a combination of suppliers in each period for optimal order allocation to profit-maximizing considering product's reliability and the weight value of products.

Keywords

References

 
Abdel-Malek, L & Areeratchakul, N. (2007). A quadratic programming approach to the multi-product newsvendor problem with side constraints, European Journal of Operational Research, 176(3), 1607-1619.
Arrow, K., Harris, T., & Marschak, J. (1951). Optimal inventory policy. The econometric Society, 19(3), 250-272.
Babich, V., Aydin, G., Brunet, P.-Y., Keppo, J., & Saigal, R. (2012). Risk, Financing and the Optimal Number of Suppliers.”. In Managing Supply Disruptions, edited by H. Gurnani, A. Mehrotra, and S. Ray. London: Springer-Verlag.
Benzion, U., Cohen, Y., & Shavit, T. (2010). The newsvendor problem with unknown distribution. Journal of the Operational Research Society, 61(6), 1022-1031.
Boran, F., Genc, S., Kurt, M., & Akay, D. (2009). A multi-criteria intuitionistic fuzzy group decision making for supplier selection with TOPSIS method. Expert Systems with Applications, 36, 11363-11368.
Burke, G., Carrillo, J., & Vakharia, A. (2007). Heuristics for Sourcing from Multiple Suppliers with Alternative Quantity Discounts. European Journal of Operational Research, 182(1), 95–112.
Chen, C., Lin, C., & Huang, S. (2006). A fuzzy approach for supplier evaluation and selection in supply chain management. International Journal of Production Economics, 102, 289-301.
Chen, J., Yao, D., & Zheng, S. (2001). Optimal replenishment and rework with multiple unreliable supply sources. Ops. Research, 49, 430-443.
Chen, X.A & Wang, Z. (2017). Optimal pricing for selling to a static multi-period newsvendor, Operations Research Letters, 45(5), 415-420. doi.org/10.1016/j.orl.2017.05.006
Chernonog, T., & Goldberg, N. (2018). On the multi-product newsvendor with bounded demand distributions. International Journal of Production Economics, 203, 38-47.
Dada, M., Schwarz, L., & Petruzzi, N. (2003). A newsvendor model with unreliable suppliers. Working Paper, 03-0112.
Gerchak, Y. (1996). A newsvendor with multiple, unreliable, all-or-nothing suppliers. Working paper. Waterloo, Ontario: University of Waterloo.
Giri, B. (2011). Managing Inventory with Two Suppliers Under Yield Uncertainty and Risk Aversion. International Journal of Production Economics, 133(1), 80-85.
Goren, H. (2018). A decision framework for sustainable supplier selection and order allocation with lost sales. J. Clean. Prod, 183, 1156-1169.
Gotoh, J-Y & Takano, Y. (2007). Newsvendor solutions via conditional value-at-risk minimization, European Journal of Operational Research, 179(1), 80-96.
Gupta, H., & Barua, M. (2017). Supplier selection among SMEs on the basis of their green innovation ability using BWM and fuzzy TOPSIS. Journal of Cleaner Production, 152, 242-258.
Ha, S., & Krishnan, R. (2008). A hybrid approach to supplier selection for the maintenance of a competitive supply chain. Expert Systems with Applications, 34(2), 1303–1311.
Hajian-Heidary , M., & Aghaie, A. (2015). Risk measurement in the global supply chain using monte-carlo simulation. Journal of Industrial Engineering and Management Studies, 2(2), 1-12.
Ho, W., Xu, X., & Dey, P. (2010). Multi-criteria decision making approaches for supplier evaluation and selection: A literature review. European Journal of Operational Research, 202(1), 16-24.
Hosseinzadeh, M., Mehregan, M. R., Aghaei Meybodi, L & Abbasian, E. (2018). Development of a stochastic summability utility model (UTA) with respect to the possibility of interdependence between criteria. Industrial Management, 10 (4), 503-524. (in Persian)
Huang, S.H., Keskar, H. & Keskar, H. (2007). Comprehensive and configurable metrics for supplier selection. Int. J. Prod. Econ, 105(2), 510-523.
Hwang, C., & Yoon, K. (1981). Methods for multiple attribute decision making. In Multiple attribute decision making. Springer, Berlin, Heidelberg, 58-191.
Kim, G., Wu, K., & Huang, E. (2015). Optimal inventory control in a multi-period newsvendor problem with non-stationary demand. Advanced Engineering Informatics, 29(1), 139-145.
Kumar, S., Kumar, S., & Barman, A. G. (2018). Supplier selection using fuzzy TOPSIS multi criteria model for a small-scale steel manufacturing unit. Procedia Computer Science, 133, 905-912.
Li, G., Yamaguchi, D., & Nagai, M. (2007). A grey-based decision-making approach to the supplier selection problem. Mathematical and Computer Modelling, 46, 573-581.
Mansur, A., Brimberg, J., & El-Refae, G. (2018). Financial planning in the public sector and the news vendor problem. Yugoslav Journal of Operations Research, 28(2), 265-274.
Merzifonluoglu, Y. (2015). Impact of risk aversion and backup supplier on sourcing decisions of a firm. International Journal of Production Research, 53(22), 6937-6961.
Minner, S. (2002). Multiple-supplier inventory models in supply chain management: A review Int’l. J. of Production Economics, 81, 265-279.
Minner, S. (2003). Multiple-supplier Inventory Models in Supply Chain Management: A Review. International Journal of Production Economics, 81-82, 265–270.
Mohammadi, M., & Rezaei, J. (2020). Bayesian best-worst method: A probabilistic group decision making model. Omega, 96, 102075.
Mohammadivojdan, R., & Geunes, J. (2018). The newsvendor problem with capacitated suppliers and quantity discounts. European Journal of Operational Research, 271(1), 109-119.
Mohammadivojdan, R., Merzifonluoglu, Y., Geunes, J. (2022). Procurement portfolio planning for a newsvendor with supplier delivery uncertainty, European Journal of Operational Research, 297(3), 917-929.
Narasimhan, R., Talluri, S. & Mahapatra, S. (2006). Multi-product, multi-criteria model for supplier selection with product life cycle considerations. Decision Sciences, 37(4), 577-603.
Ng, W. (2008). An efficient and simple model for multiple criteria supplier selection problem. European Journal of Operational Research, 186(3), 1059-1067.
Papachristos, I & Pandelis, D.G. (2022). Newsvendor models with random supply capacity and backup sourcing, European Journal of Operational Research, doi.org/10.1016/j.ejor.2022.03.036.
Porteus, E. (2002). Foundations of stochastic inventory theory. Stanford University Press.
Qin, Y., Wang, R., Vakharia, A., Chen, Y., & Sere, M. (2011). The newsvendor problem: Review and directions for future research. European Journal of Operational Research, 213(2), 361–374.
Razavi Hajiagha, S.H., Alaei, S., Amoozad Mahdiraji, H. (2021). Multi-objective multi-product sustainable newsvendor management in an emerging economy: Evidence and applications, Journal of Cleaner Production, 310, 127466.
Rezaei Noor, J., Ghazanfari Nasrabad, M. & Droudy, A. (2016). Development of a bulls-bulls method for multi-criteria decision making with gray numbers in order to select the equipment supplier (Case study: selection and purchase of hospital equipment). Industrial Management, 8 (4), 601-624. (in Persian)
Rezaei, J. (2015). Best-worst multi-criteria decision-making method. Omega, 53, 49-57.
Rezaei, J. (2016). Best-worst multi-criteria decision-making method: Some properties and a linear model. Omega, 64, 126-130.
Rouhi, F., Ebrahimi, S.B & Ketabian, H. (2015). Development of transnational location modeling using a combination of multi-criteria decision making methods and cover location models in conditions of uncertainty. Industrial Management, 7 (4), 743-766.
(in Persian)
Serel, D. (2008). Inventory and Pricing Decisions in a Single-period Problem Involving Risky Supply. International Journal of Production Economics, 116(1), 115-128.
Shamsi, M. & Shahrokhi, M. (2020). Selection of suppliers of repairable equipment with the aim of minimizing costs in the construction and operation phases. Industrial Management Journal, 11(3), 47-73. (in Persian)
Shaverdi, M., Yaghoubi, S., & Soltani, B. (2019). Project Evaluation and Selection in
Technology Development Funds with Best-Worst Method (Case Study: Innovation and Prosperity Fund). Industrial Management Journal, 11(3), 461-486. (in Persian)
Silver, E., Pyke, D., & Peterson, R. (1998). Inventory Management and Production Planning and Scheduling. New York: Wiley.
Swaminathan, J., & Shanthikumar, J. (1999). Supplier Diversification: Effect of Discrete Demand. Operations Research Letters, 24(5), 213-221.
Torabi, S., Baghersad, M., & Mansouri, S. (2015). Resilient Supplier Selection and Order Allocation Under Operational andDisruption Risks. Transportation Research Part E: Logistics and Transportation Review, 79, 22-48.
Turken, N., Tan, Y., J Vakharia, A., Wang, L., Wang, R., & Yenipazarli, A. (2012). The multi-product newsvendor problem: Review, extensions, and directions for future research. Handbook of newsvendor problems, 3-39.
Wang, S.Y., Choi, S.H. (2020). Decision analysis for the emission-limited manufacturer with option contracts under demand uncertainty. J. Clean. Prod. 258, 120712.
Wieloch, H. G. (2017). Newsvendor problem under complete uncertainty: a case of innovative products. Central European Journal of Operations Research, 25(3), 561-585.
Yazdia, M. &Pasand ideh, S.H.R. (2022). A multi-objective two-echelon newsvendor problem with limited budget and capacity, Scientia Iranica E, 29(1), 275-289.
Zhang, B. (2012). A multi-tier binary solution method for multi-product newsvendor problems with multiple constraints. European Journal of Operational Research, 218 (2), 426–434.
Industrial Management Journal
Volume 14, Issue 1
2022
Pages 115-142

Files

Share

How to cite

Statistics