Combining Supplier Selection and Production-Distribution Planning in Food Supply Chains

Abstract

This work addresses an integrated framework for deciding about the supplier selection in processed food supply chains that accounts for tactical production and distribution planning. We are especially concerned with the option of producing with local or mainstream raw materials. The contribution of this paper is two-fold. Firstly, it proposes a new multi-objective two-stage stochastic mixed-integer programming model for the supplier selection that maximizes the profit and minimizes the risk of a low customer service. Secondly, the main complexities of processed food supply chains management are considered: perishability of raw materials and final products, uncertainty at downstream and upstream parameters, and customer willingness to pay. Results indicate that dual sourcing is a strategy to be pursued across several scenarios. The multi-objective approach shows that a small decrease in the expected value of profit results in a significant increase in the customer service. Acknowledging the increase in customers willing to pay for local products is also fundamental.