Order splitting with multiple capacitated suppliers

This paper studies an integrated decision making model for a supply chain system where a manufacturer faces a price-sensitive demand and multiple capacitated suppliers, two issues that are often considered separately in the literature. The goal is to maximize total profit by determining an optimal selling price and at the same time acquiring enough supplying capacity. The problem is proved to be NP-hard in the ordinary sense, a heuristic algorithm and an optimal dynamic programming algorithm are developed. Computational experiments are conducted to study the efficiency and effectiveness of the algorithms. Some managerial insights are observed.