The impact of order allocation decision on supply chain benefits under multiple suppliers

Increasing competitive pressures, market globalization, and shortened product life cycles are forcing firms to develop supply chains that can quickly respond to customer needs. How to manage demand instability as well as controlling well makes a great impact on order allocation decisions, whereas it plays an important role in minimizing total purchasing costs, while maintaining a specified service level. The objective of this article is to explore how order allocation decisions influence a supply chain. A simulation-based system structure is therefore proposed for regular/urgent orders, and factors under consideration include cost, quality, delivery date, service quality, order fill rates, production capacity, and current order quantities simultaneously. Multiple concerns in this article include total turnover, purchasing costs, back order costs, transportation costs, and order waiting costs. Finally, its effectiveness in terms of the service level and the company's total purchasing cost is examined by a numerical example.