Supplier selection and order allocation under disruption risk

The supplier’s risk is nowadays one of the important topics in the supply chain management. This paper studies the problem of the supplier’s selection and order allocation in a make-to-order environment in the presence of disruption risk supplier. Two mixed integer programs are developed. The first considers a risk neutral decision-maker who maximizes the expected profit, whereas the second regards a risk-averse decision-maker someone who minimizes the expected operational loss. The results demonstrate that the expected profit and the operational loss evolve in the same way. An increase of the expected profit will also increase the expected loss, which, in turn, reduces the profit. Our goal is to produce the evolution curve of these two indicators and provide the decision-maker with visual aid to choose solution corresponding to his sensitivity to risk