Stochastic Decentralized Bi-Level Programming for Supplier Selection and Order Allocation

The aim of this paper is to present an integrated and practical optimization method for solving a supplier selection and order allocation problem by considering a hierarchical structure under randomness. To accomplish this, a stochastic expected linear bi-level programming model is developed based on the supplier selection and order allocation in the context of the home decoration company. In this model, the demand, price, defect rate and late delivery rate are considered as stochastic variables. The corporation managers, the leader in the hierarchy, seeks to optimize the total cost. The project teams, the followers in the hierarchy, mainly concern the factors which may affect the project schedule and quality. As it is very difficult to solve bi-level model even it is linear with single objective in each level, an interactive fuzzy programming is applied to transform the bi-level to a single level model which can be easily solved using LINGO. Finally, a case study is presented to demonstrate the applicability and efficiency of this method.