Selecting sourcing partners for a make-to-order supply chain

Make-to-order manufacturers face an idiosyncratic and complex situation in the sourcing selection process. Although they can source from several key suppliers, each order requires custom key parts that cannot be stocked. Our research provides a decision model to facilitate the sourcing process for these manufacturers using information about their sourcing partners’ cost and processing time. The manufacturer can calculate the total cost and on-time probability for all possible combinations of certified suppliers and key part allotments to obtain a sourcing portfolio with several sourcing alternatives for a desired service level. The portfolio allows the manufacturer to make trade-offs between cost and reliability to finish the job on time. Additionally, the portfolio can be obtained for a given due date or for reduced due dates in a competitive bid situation. The portfolio approach allows the manufacturer to maintain control over the sourcing selection process by partnering with sourcing members to keep costs low without losing the needed flexibility to meet customer demands.