Abstract: This paper studies the dual-source procurement problem that an assembler procures goods from one overseas supplier with low price but long lead-time and one local supplier with high price but short lead-time. We assume, the demand is normal distribution, a smoothing order strategy is proposed. With this order strategy, the new purchasing quantity is determined using the smoothing technique, i.e., the new purchasing quantity equals to the weighted value of the last period purchasing quantity and the current market demand. We establish optimization models for two situations, one considers warehouse space constraint and another one does not. Then, the optimal smoothing purchasing coefficient and the optimal storage space are obtained. In the last, numerical examples are conducted.

Key words: smoothing procurement, dual-source procurement, lead time, global sourcing