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A dynamic sourcing strategy considering supply disruption risks

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  • W.C. Tsai

Abstract

This study presents a formulation that supports decision-making by determining the optimal number of standby suppliers required to respond to supply failure risks. The problem of supply failure is modelled through a standby approach, in which failure is time-dependent. The probabilities of supply interruption, financial loss caused by supply failure, and operating cost of working with suppliers are modelled to yield the expected total cost, which enables organisations to determine the optimal number of suppliers. Two possible modes of substitution failure are considered in the standby model to enhance the analysis. A set of sensitivity analyses are performed for several input parameters to illustrate the model’s behaviour. The analysis provides an optimal sourcing strategy depending on a combination of supply risk, operational cost vs. loss ratio and length of the supply period. The proposed model indicates the benefits of cost savings, unlike other dynamic models that use multiple suppliers simultaneously.

Suggested Citation

  • W.C. Tsai, 2016. "A dynamic sourcing strategy considering supply disruption risks," International Journal of Production Research, Taylor & Francis Journals, vol. 54(7), pages 2170-2184, April.
    • Handle: RePEc:taf:tprsxx:v:54:y:2016:i:7:p:2170-2184
    DOI: 10.1080/00207543.2015.1129465
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    Cited by:

    1. Dmitry Ivanov, 2017. "Simulation-based ripple effect modelling in the supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 55(7), pages 2083-2101, April.
    2. Gupta, Varun & Ivanov, Dmitry & Choi, Tsan-Ming, 2021. "Competitive pricing of substitute products under supply disruption," Omega, Elsevier, vol. 101(C).
    3. Dmitry Ivanov & Alexandre Dolgui & Boris Sokolov & Marina Ivanova, 2017. "Literature review on disruption recovery in the supply chain," International Journal of Production Research, Taylor & Francis Journals, vol. 55(20), pages 6158-6174, October.
    4. Shao, Xiao-Feng, 2018. "Production disruption, compensation, and transshipment policies," Omega, Elsevier, vol. 74(C), pages 37-49.
    5. Tadeusz Sawik, 2018. "Selection of a dynamic supply portfolio under delay and disruption risks," International Journal of Production Research, Taylor & Francis Journals, vol. 56(1-2), pages 760-782, January.
    6. Maheswar Singh Mahapatra & Pravash Chandra Pradhan & J. K. Jha, 2022. "Sourcing decisions with order allocation under supply disruption risk considering quantitative and qualitative criteria," Operational Research, Springer, vol. 22(4), pages 3291-3333, September.

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