Dynamic Intelligent System for Sourcing Contingency Planning Considering Supplier Failures

This paper considers the allocation of demand across a set of suppliers given supplier failures. The buyer can purchase a critical item from multiple suppliers and each supplier has unique reliability characteristics. The model assumes there is information about the suppliers´ failure condition and the ability of those suppliers that do not fail to produce emergency units. The model takes into account multiple costs including supplier fixed costs and variable costs per unit, transportation costs, and the financial loss of not meeting requirements, particular to that demand point. The model utilizes the decision tree approach to consider all the possible states of nature when one or more suppliers fail, as well as expanding the traditional transportation problem.