Supplier selection-order allocation: A two-stage multiple criteria dynamic programming approach

This paper proposes a two-stage multiple criteria dynamic programming approach for two of the most critical tasks in supply chain management, namely, supplier selection and order allocation. In the first stage, to address multiple decision criteria in supplier ranking, the analytic hierarchy process (AHP) is employed. In the second stage, supplier ranks are fed into an order allocation model that aims at maximizing a utility function for the firm as well as minimizing the total supply chain costs, subject to constraints on demand, capacity, and inventory levels. A dynamic programming approach is crafted to solve the proposed bi-objective model.