• IE interfaces
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• v.23 no.4
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• pp.327-336
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• 2010

We consider a supply chain consisting of a make-to-order manufacturer and N component suppliers and study the impacts of the number of suppliers on component inventory management. The manufacturer has full information and continuously observes the state of both component inventory level and customer backorders. Based on this information, the manufacturer determines whether or not to place a component purchasing order to a supplier among N suppliers even though some orders are in process by other suppliers. The goal of this paper is to numerically identify the manufacturer's purchasing policy which minimizes the total supply chain cost and the best choice of N. Our model contributes to the current literature in that the problem of simultaneously considering multiple outstanding orders and incorporating order setup cost into the model has not been covered yet. From numerical experiment, we investigate how much the policy with N suppliers can contribute to reducing the supply cost compared to the policy with a single supplier.