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Supply Strategy: A Quasi-Experiment on the Number And Location of Suppliers

Author

Listed:
  • André Luis de Castro Moura Duarte

    (Insper)

  • Rafael Borges de Souza

    (Insper)

  • Flávio Romero Macau

    (Universidade Paulista - UNIP)

  • Leandro Januario de Souza

    (Universidade Nove de Julho - UNINOVE)

Abstract

Objective: Evaluate the impact of a second supply source on price, quality and stock levels at the purchasing company. Relevance: The supply strategy defines how many suppliers an item should have and where it should be located. If working with a single supplier may bring relational benefits, working with multiple sources may reduce opportunism risks. If a local supplier reaps benefits on account of its proximity, a global supplier may result in lower costs. Methodology: The quasi-experimental method was used to follow-up a purchasing policy change at an auto parts company, which took on a second supply source for low complexity items. The research collected data on costs, quality and stock coverage for 1,480 items between 2007 and 2012, analysing new supplier’s entrance and location. Results: Introducing a second supplier reduced the price, especially when a new international supplier was introduced. Decreases in quality or increases in stock coverage were not observed.

Suggested Citation

  • André Luis de Castro Moura Duarte & Rafael Borges de Souza & Flávio Romero Macau & Leandro Januario de Souza, 2017. "Supply Strategy: A Quasi-Experiment on the Number And Location of Suppliers," Brazilian Business Review, Fucape Business School, vol. 14(5), pages 528-543, September.
    • Handle: RePEc:bbz:fcpbbr:v:14:y:2017:i:5:p528-543
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    References listed on IDEAS

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    5. Cuihong Li & Laurens G. Debo, 2009. "Second Sourcing vs. Sole Sourcing with Capacity Investment and Asymmetric Information," Manufacturing & Service Operations Management, INFORMS, vol. 11(3), pages 448-470, July.
    Full references (including those not matched with items on IDEAS)

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