Heuristic procedures to solve a binary nonlinear supply chain model: A case study from the Aerospace industry

In the aerospace industry quality is an important factor and suppliers are chosen on the basis of quality as well as cost. By integrating cost of quality (COQ) into supply chain network design (SCND), managers could make decisions based on operational costs and also based on quality non-conformance costs. This paper presents a case study for a leading company in the Aerospace industry with COQ integrated into SCND. Further in this paper, we present a model that tailors to a real life supply chain with cost of quality (COQ), binary variables for assignable cost representation of supply chain nodes, and an n level bill of material (BOM) integrated; the model resulting is a nonlinear model and is challenging to solve. Six known heuristics and a new hybrid heuristic are tested and the performance of each heuristic is compared to a lower bound on the optimal solution.