VENDOR SELECTION WITH PRICE BREAKS

We study the problem of vendor selection where a buyer must choose ord er quantities to place with vendors in a multiple-sourcing network. Th e selection process is influenced by the price, delivery, and quality objectives of the buyer, as well as by the production or rationing con straints of the vendors. Vendors are assumed to offer price breaks whi ch depend on the sizes of the order quantities. Each price break sched ule is characterized by two attributes: it represents either quantity discounts or surcharges, and is either cumulative (all-units) or noncu mulative (incremental). We present linear and mixed binary integer pro gramming models that provide unifying frameworks for models of vendor performance measures from the purchasing literature and models of pric e breaks from the Operations Research literature. We argue that our mo dels offer viable approaches to vendor selection with price breaks bec ause of the availability of commercial software packages for personal computers that provide flexible and efficient computational tools for solving the models. This implies that vendor selection with price brea ks can be performed at the fingertips of purchasing managers.