A mathematical model for order splitting in a multiple supplier single-item inventory system

In this paper we develop a mathematical model which considers multiple-supplier single-item inventory systems. The lead times of the suppliers and demand arrival rate are random variables. All shortages are backordered. Continuous review (s, Q) policy has been assumed. When the inventory level hits the reorder level, the total order is split among n suppliers. The problem is to determine the reorder level and order quantity for each supplier so that the expected total cost per time unit, including ordering cost, procurement cost, inventory holding cost and shortage cost is minimized. We also conduct extensive numerical experiments to show the advantages of our model compared to the relevant models in the literature. In addition, some managerial insights are observed.

► We develop an analytical model for determining optimal order splitting.
► We determine reorder level for N-supplier inventory systems.
► We also have done extensive numerical analyses.
► We have found some new managerial insights regarding the effect of the system parameters on the system performance measures.
► The decision of whether to employ a single, dual or multiple sourcing is also discussed.