Can multiple sourcing reduce total logistics costs? A case study.

W. Dullaert, B. Raa, B. Vernimmen, F. Witlox

In this paper, single and multiple sourcing approaches are illustrated on a real-life instance of an inbound resupply problem. The nature of the demand and lead time distributions calls for detailed modelling of these distributions. For single sourcing, their compound distribution is determined analytically. For multiple sourcing, demand during lead time is simulated and the optimal mix of sourcing alternatives is determined by an evolutionary algorithm. The analysis of single sourcing resupply strategies obtained by the single and the multiple sourcing approaches illustrates an underestimation of the safety stock for the latter approach. Directions for alleviating this problem are suggested.

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