A Modified Simulated Annealing (MSA) Algorithm to Solve the Supplier Selection and Order Quantity Allocation Problem with Non-Linear Freight Rates

Abstract

Economic Order Quantity (EOQ) is an important optimization problem for inventory management with an impact on various industries; however, their mathematical models may be complex with non-convex, non-linear, and non-differentiable objective functions. Metaheuristic algorithms have emerged as powerful tools for solving complex optimization problems (including EOQ). They are iterative search techniques that can efficiently explore large solution spaces and obtain near-optimal solutions. Simulated Annealing (SA) is a widely used metaheuristic method able to avoid local suboptimal solutions. The traditional SA algorithm is based on a single agent, which may result in a low convergence rate for complex problems. This article proposes a modified multiple-agent (population-based) adaptive SA algorithm; the adaptive algorithm imposes a slight attraction of all agents to the current best solution. As a proof of concept, the proposed algorithm was tested on a particular EOQ problem (recently studied in the literature and interesting by itself) in which the objective function is non-linear, non-convex, and non-differentiable. With these new mechanisms, the algorithm allows for the exploration of different regions of the solution space and determines the global optimum in a faster manner. The analysis showed that the proposed algorithm performed well in finding good solutions in a reasonably short amount of time.

Keywords

• inventory management
• supply chain
• order quantity
• Simulated Annealing