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Single versus multiple sourcing in the presence of risks

Author

Listed:
  • P D Berger

    (Boston University)

  • A Z Zeng

    (Worcester Polytechnic Institute)

Abstract

This paper relies on a decision-tree approach to aid a buying firm in determining the optimal size of its supply base in the presence of risks. The risk under consideration refers to any unpredictable operations interruptions caused by all suppliers being unavailable to satisfy the buying firm's demand. The relationship between the levels of risk and associated trade-offs is captured by a decision-tree model, from which the expected cost function is formulated. The exact or approximate optimal solutions for various scenarios, as well as their sensitivity, are obtained and examined.

Suggested Citation

  • P D Berger & A Z Zeng, 2006. "Single versus multiple sourcing in the presence of risks," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 57(3), pages 250-261, March.
    • Handle: RePEc:pal:jorsoc:v:57:y:2006:i:3:d:10.1057_palgrave.jors.2601982
    DOI: 10.1057/palgrave.jors.2601982
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    References listed on IDEAS

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    1. Swift, Cathy Owens, 1995. "Preferences for single sourcing and supplier selection criteria," Journal of Business Research, Elsevier, vol. 32(2), pages 105-111, February.
    2. Robert F. Nau, 2003. "A Generalization of Pratt-Arrow Measure to Nonexpected-Utility Preferences and Inseparable Probability and Utility," Management Science, INFORMS, vol. 49(8), pages 1089-1104, August.
    3. Selnes, Fred & Gonhaug, Kjell, 2000. "Effects of Supplier Reliability and Benevolence in Business Marketing," Journal of Business Research, Elsevier, vol. 49(3), pages 259-271, September.
    4. Yunzeng Wang & Yigal Gerchak, 2003. "Capacity Games in Assembly Systems with Uncertain Demand," Manufacturing & Service Operations Management, INFORMS, vol. 5(3), pages 252-267, January.
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