Vendor selection and order quantity allocation in volume discount environments

This article presents a multiobjective mixed integer programming approach to simultaneously determine the number of vendors to employ and the order quantities to allocate to these vendors in a multiple‐product, multiple‐supplier competitive sourcing environment. The selection process is driven by the price, delivery, and quality objectives of the buyer and subject to the capacity constraints of the vendors. In this context, the vendors offer discounts on total amount of sales volumes not on the quantity or variety of products purchased from them. The paper presents a solution methodology to the multiobjective problem. Results of a computational experiment suggest that real‐world applications of the proposed model are both computationally practical and realistic.