Managing Supply Disruptions when Sourcing from Reliable and Unreliable Suppliers

Bin Hu · Dimitris Kostamis

148 citations0/0 files storedProduction and Operations Management

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Supply Chain and Inventory Management Sustainable Supply Chain Management Supply Chain Resilience and Risk Management

Abstract

We study a manufacturer's optimal multiple‐sourcing strategies when some but not all suppliers face risks of complete supply disruptions. Using an approximate model, we show that the optimal unreliable orders are ranked by a simple and intuitive criterion, and are invariant of minor market size changes. Furthermore, when ordering from one reliable and one unreliable supplier, we show that the total order quantity and its allocation between the two suppliers are independent decisions. We then test and confirm the robustness of the insights without the approximation, as well as when we relax various assumptions.

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References

2007A Newsvendor’s Procurement Problem when Suppliers Are Unreliable 1993Diversification Under Supply Uncertainty 2007Competition and Diversification Effects in Supply Chains with Supplier Default Risk 2008Supply Disruptions, Asymmetric Information, and a Backup Production Option 2009Mitigating Supply Risk: Dual Sourcing or Process Improvement?2007The importance of decoupling recurrent and disruption risks in a supply chain 2011Supplier Diversification Strategies in the Presence of Yield Uncertainty and Buyer Competition 2012Managing Disruption Risk: The Interplay Between Operations and Insurance

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2020Sustainable supply chain management towards disruption and organizational ambidexterity: A data driven analysis 2017Building up Resilience in a Pharmaceutical Supply Chain through Inventory, Dual Sourcing and Agility Capacity 2019Ensuring Corporate Social and Environmental Responsibility Through Vertical Integration and Horizontal Sourcing 2024Supply chain resilience: A review from the inventory management perspective 2020Typology and literature review on multiple supplier inventory control models

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