TY - JOUR
T1 - Contingent sourcing under supply disruption and competition
AU - Gupta, Varun
AU - He, Bo
AU - Sethi, Suresh P.
N1 - Funding Information:
This work is supported by the National Natural Science Foundation of China [grant number 71001111].
Publisher Copyright:
© 2014 Taylor & Francis.
PY - 2015/5/19
Y1 - 2015/5/19
N2 - With the increasing awareness of the serious consequences of supply disruption risk, firms adopt various kinds of strategies to mitigate it. We consider a supply chain in which two suppliers sell components to two competing manufacturers producing and selling substitutable products. Supplier U is unreliable and cheap, while Supplier R is reliable and expensive. Firm C uses a contingent dual-sourcing strategy and Firm S uses a single-sourcing strategy. We study the implications of the contingent sourcing strategy under competition and in the presence of a possible supply disruption. The time of the occurrence of the supply disruption is uncertain and exogenous, but the procurement time of components is in the control of the firms. We show that supply disruption and procurement times jointly impact the firms buying decisions. We characterise the firms optimal order quantities and their expected profits under different cases. Subsequently, through numerical computations, we obtain additional managerial insights. Finally, as extensions, we study the impact endogenizing equilibrium sourcing strategies of asymmetric and symmetric firms, and of capacity reservation by Firm C with Supplier R to mitigate disruption.
AB - With the increasing awareness of the serious consequences of supply disruption risk, firms adopt various kinds of strategies to mitigate it. We consider a supply chain in which two suppliers sell components to two competing manufacturers producing and selling substitutable products. Supplier U is unreliable and cheap, while Supplier R is reliable and expensive. Firm C uses a contingent dual-sourcing strategy and Firm S uses a single-sourcing strategy. We study the implications of the contingent sourcing strategy under competition and in the presence of a possible supply disruption. The time of the occurrence of the supply disruption is uncertain and exogenous, but the procurement time of components is in the control of the firms. We show that supply disruption and procurement times jointly impact the firms buying decisions. We characterise the firms optimal order quantities and their expected profits under different cases. Subsequently, through numerical computations, we obtain additional managerial insights. Finally, as extensions, we study the impact endogenizing equilibrium sourcing strategies of asymmetric and symmetric firms, and of capacity reservation by Firm C with Supplier R to mitigate disruption.
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U2 - 10.1080/00207543.2014.965351
DO - 10.1080/00207543.2014.965351
M3 - Article
AN - SCOPUS:84925280670
SN - 0020-7543
VL - 53
SP - 3006
EP - 3027
JO - International Journal of Production Research
JF - International Journal of Production Research
IS - 10
ER -