Optimal supplier selection and order allocation for multi-product manufacturing featuring customer flexibility

Efficient and effective supplier-selection and order-allocation decisions are critical for manufacturing industries to ensure stable material flows in today’s highly competitive supply chain, in particular, when customers are willing to accept products with less desirable attributes (e.g., colour, material) for economic reasons. This study terms this kind of customer behaviour as ‘customer flexibility’ and attempts to optimally solve the challenging problem of supplier selection and order allocation incorporating customer flexibility. A new mixed integer programming model is developed to maximise manufacturer’s total profit. Due to the complexity and non-deterministic polynomial-time -hard nature of the problem, a novel hybrid constraint programming (CP) and simulated annealing (SA) algorithm ‘CP–SA’ is developed to solve the problem optimally. Extensive computational experiments clearly demonstrate its excellent performance.