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Analysis of dual sourcing strategies under supply disruptions

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  • Zhu, Stuart X.

Abstract

We study a dual-sourcing problem of a firm in the face of supply disruptions from two suppliers: local and overseas. Under four different scenarios of disruption source and information availability, we characterize the optimal dynamic policy that simultaneously determines sourcing decisions to minimize the expected total discounted cost. Different from the previous dual-sourcing models without information availability in the literature, we develop a two-dimensional stochastic dynamic programming model to explicitly address this issue. Further, we analyze the impact of disruption source and information availability on cost performance. We find that (i) a supply disruption at the local source may cause a more remarkable deterioration of cost efficiency than a supply disruption at the overseas source; (ii) the information about the local source is more valuable than that about the overseas source; (iii) when a firm orders from both sources, the disruption information can achieve a significant cost saving. These findings contribute to the theory of strategic sourcing by demonstrating the value of information available at different sources. Moreover, they can also be used as a valuable guideline for managers to select an appropriate sourcing strategy in business practices.

Suggested Citation

  • Zhu, Stuart X., 2015. "Analysis of dual sourcing strategies under supply disruptions," International Journal of Production Economics, Elsevier, vol. 170(PA), pages 191-203.
    • Handle: RePEc:eee:proeco:v:170:y:2015:i:pa:p:191-203
    DOI: 10.1016/j.ijpe.2015.09.019
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    Cited by:

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    2. Zheng, Meimei & Dong, Shuangshuang & Zhou, Yaoming & Choi, Tsan-Ming, 2023. "Sourcing decisions with uncertain time-dependent supply from an unreliable supplier," European Journal of Operational Research, Elsevier, vol. 308(3), pages 1365-1379.
    3. Doan Ngoc Thang, 2024. "How do regional extreme events shape supply-chain trade?," International Economics and Economic Policy, Springer, vol. 21(1), pages 117-149, February.
    4. Jiaping Xie & Lihong Wei & Weisi Zhang & Yu Xia & Jing Li, 2019. "A Responsive Pricing Grid Operator Sourcing from Competing Generators under Uncertain Supply and Demand," Sustainability, MDPI, vol. 11(15), pages 1-30, July.
    5. Boulaksil, Youssef & Hamdouch, Younes & Ghoudi, Kilani & Fransoo, Jan C., 2021. "Comparing policies for the stochastic multi-period dual sourcing problem from a supply chain perspective," Other publications TiSEM 242598b9-99de-4a3c-a1a9-4, Tilburg University, School of Economics and Management.
    6. Tran Manh Ha & Doan Ngoc Thang, 2023. "Economic sanction and global sourcing complexity: A cross‐country analysis," The World Economy, Wiley Blackwell, vol. 46(4), pages 1017-1050, April.
    7. Boulaksil, Youssef & Hamdouch, Younes & Ghoudi, Kilani & Fransoo, Jan C., 2021. "Comparing policies for the stochastic multi-period dual sourcing problem from a supply chain perspective," International Journal of Production Economics, Elsevier, vol. 232(C).
    8. Qing Zhang & Weiguo Fan & Jianchang Lu & Siqian Wu & Xuechao Wang, 2021. "Research on Dynamic Analysis and Mitigation Strategies of Supply Chains under Different Disruption Risks," Sustainability, MDPI, vol. 13(5), pages 1-29, February.
    9. Jakšič, M. & Fransoo, J.C., 2018. "Dual sourcing in the age of near-shoring: Trading off stochastic capacity limitations and long lead times," European Journal of Operational Research, Elsevier, vol. 267(1), pages 150-161.
    10. Basu, Arnab & Jain, Tarun & Hazra, Jishnu, 2018. "Supplier selection under production learning and process improvements," International Journal of Production Economics, Elsevier, vol. 204(C), pages 411-420.
    11. Jain, Tarun & Hazra, Jishnu, 2017. "Dual sourcing under suppliers' capacity investments," International Journal of Production Economics, Elsevier, vol. 183(PA), pages 103-115.
    12. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    13. Gupta, Varun & Ivanov, Dmitry & Choi, Tsan-Ming, 2021. "Competitive pricing of substitute products under supply disruption," Omega, Elsevier, vol. 101(C).

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