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Title: Optimal contract selection for the global supply and distribution of raw materials
Authors: Bansal, M. 
Karimi, I.A. 
Srinivasan, R. 
Issue Date: 26-Sep-2007
Citation: Bansal, M., Karimi, I.A., Srinivasan, R. (2007-09-26). Optimal contract selection for the global supply and distribution of raw materials. Industrial and Engineering Chemistry Research 46 (20) : 6522-6539. ScholarBank@NUS Repository.
Abstract: A multinational company's purchases go well beyond basic raw materials; they include catalysts, indirect materials, additives, etc. Strategic sourcing contracts offer several advantages and are common practice in many industries, especially the chemical industry. However, contracts come in various shades of price, commitments, duration, terms, flexibility, lead time, quality, discounts, product bundling, etc. Selecting the best contracts and suppliers for a company's globally distributed sites in an integrated and global business environment can be nontrivial. In this paper, we propose a relatively comprehensive classification of material supply contracts and propose a multiperiod mathematical programming model that selects optimal contracts for the minimum total procurement cost in the face of several practical considerations such as different contract types, multitier prices and discounts, logistics and inventory costs, quantity/dollar purchase commitments, spot market, product bundling, etc. The model also identifies the optimal distribution of materials from various suppliers to plant sites. Our examples demonstrate substantial savings over ad hoc or heuristic methods. © 2007 American Chemical Society.
Source Title: Industrial and Engineering Chemistry Research
ISSN: 08885885
DOI: 10.1021/ie070395w
Appears in Collections:Staff Publications

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