This paper discusses the development of optimization model for supplier selection and order allocation considering price discounts and quality of the components that are measured based on expectation of quality loss cost. The approach which was used quadratic loss function to estimated quality loss. The development of model is based on the drawback of previous research; where quality was measured only by defective components without considered to any loss of quality due to deviation from quality characteristics target. In the section of results and discussion of this paper is presented a numerical example in order to illustrate the implementation of proposed model. This numerical experiment performed by optimization software has indicated that the model able to generated optimal solution.
Keywords- optimization model, supplier selection, price, discount, quality los
