Supplier Selection Model Considering the Supplier Failures and Price Fluctuations

The selection of the right suppliers is crucial to ensure supply chain resilience. This study proposes a two-stage robust optimization model that combines box uncertainty sets with a supplier delivery outcome that is described by a portfolio state represented as a binary vector indicating for every supplier whether it delivers or fails. The model aims to maximize the total profit by considering the uncertainty of the market selling price and the risk of supply failures, while also incorporating flexible production capacity constraints. The experimental results demonstrate that enhancing supplier capacity flexibility and prioritizing low-risk suppliers can significantly increase total profit and reduce unmet demand losses. Maintaining price fluctuations within a reasonable range also contributes to higher overall profit.