Supplier selection and order allocation with currency fluctuation under carbon cap and trade

CAO Yu, HU Hanli, WAN Guangyu

Systems Engineering - Theory & Practice ›› 2016, Vol. 36 ›› Issue (7) : 1676-1686.

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Systems Engineering - Theory & Practice ›› 2016, Vol. 36 ›› Issue (7) : 1676-1686. DOI: 10.12011/1000-6788(2016)07-1676-11

Supplier selection and order allocation with currency fluctuation under carbon cap and trade

  • CAO Yu1, HU Hanli1, WAN Guangyu2
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Abstract

Supplier selection has become critical in operating decisions in global supply chain management. We study the problem of suppliers' selection in the presence of carbon trading and uncertain of currency exchange rates. We specifically consider a buyer with multiple sites sourcing a product from heterogeneous suppliers and address both the supplier selection and purchased quantity decision. We model the problem using the mixed integer scenario-based stochastic programming method. The objective is to minimize the total system expected cost, including supplier management cost, purchased price, inventory cost, transportation cost, carbon trading cost. Our analysis shows that the exchange rate volatility can affect supplier selection. Compared with fixed exchange rate model, fluctuating exchange rate model is more profitable. Further, the more sophisticated stochastic model we proposed, compared with a simple deterministic model, can increase the yield, no matter whether any fluctuation exists. In addition, carbon caps and carbon price will also affect the supplier selection. The lower carbon caps, the higher the purchase cost, therefore companies' purchasing strategy will be adjusted accordingly. The purchasing cost will increase as carbon price increase, which leads to a shape of staircase for the amount of the order quantity.

Key words

carbon cap and trade / currency fluctuations / supplier selection / order allocation

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CAO Yu , HU Hanli , WAN Guangyu. Supplier selection and order allocation with currency fluctuation under carbon cap and trade. Systems Engineering - Theory & Practice, 2016, 36(7): 1676-1686 https://doi.org/10.12011/1000-6788(2016)07-1676-11

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Funding

National Natural Science Foundation of China (71573281, 71573280);Innovation-driven Project of Central South University (2016CX040)
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