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Multiobjective capital allocation for supplier development under risk

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  • Kamil J. Mizgier
  • Joseph M. Pasia
  • Srinivas Talluri

Abstract

Supplier development is increasingly important due to the complexity of today’s supply chains and the globalisation of businesses. Since manufacturers have only limited resources, they need to make an informed decision about which suppliers to develop. Moreover, the returns from investment in supplier development are uncertain, so manufacturers have to take this risk into account when choosing their suppliers for development programmes. In this paper, we propose a multi-objective model for capital allocation for supplier development under risk. We apply it to an example of a global car manufacturer and support the decision-making process with data downloaded from the Bloomberg database. We use stock market returns and cost of capital of suppliers to assess their performance. Our model supports an informed decision, which is that tradeoffs exist between risk and cost of supplier development programme. Depending on the risk aversion of the manufacturer, we demonstrate different allocation schemes for supplier development.

Suggested Citation

  • Kamil J. Mizgier & Joseph M. Pasia & Srinivas Talluri, 2017. "Multiobjective capital allocation for supplier development under risk," International Journal of Production Research, Taylor & Francis Journals, vol. 55(18), pages 5243-5258, September.
    • Handle: RePEc:taf:tprsxx:v:55:y:2017:i:18:p:5243-5258
    DOI: 10.1080/00207543.2017.1302618
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    2. Wei Song & Zhiya Chen & Aijun Liu & Qiuyun Zhu & Wei Zhao & Sang-Bing Tsai & Hui Lu, 2018. "A Study on Green Supplier Selection in Dynamic Environment," Sustainability, MDPI, vol. 10(4), pages 1-22, April.
    3. Resende, Carlos Henrique Lopes & Lima-Junior, Francisco Rodrigues & Carpinetti, Luiz Cesar Ribeiro, 2023. "Decision-making models for formulating and evaluating supplier development programs: A state-of-the-art review and research paths," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 180(C).
    4. Giovanna Culot & Matteo Podrecca & Guido Nassimbeni & Guido Orzes & Marco Sartor, 2023. "Using supply chain databases in academic research: A methodological critique," Journal of Supply Chain Management, Institute for Supply Management, vol. 59(1), pages 3-25, January.
    5. Yazdani, Morteza & Torkayesh, Ali Ebadi & Chatterjee, Prasenjit & Fallahpour, Alireza & Montero-Simo, Maria Jose & Araque-Padilla, Rafael A. & Wong, Kuan Yew, 2022. "A fuzzy group decision-making model to measure resiliency in a food supply chain: A case study in Spain," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    6. Glock, Christoph H. & Grosse, Eric H. & Ries, Jörg M., 2017. "Reprint of “Decision support models for supplier development: Systematic literature review and research agenda”," International Journal of Production Economics, Elsevier, vol. 194(C), pages 246-260.
    7. Hosseini, Seyedmohsen & Ivanov, Dmitry & Dolgui, Alexandre, 2019. "Review of quantitative methods for supply chain resilience analysis," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 125(C), pages 285-307.
    8. Golmohammadi, Amirmohsen & Taghavi, Majid & Farivar, Samira & Azad, Nader, 2018. "Three strategies for engaging a buyer in supplier development efforts," International Journal of Production Economics, Elsevier, vol. 206(C), pages 1-14.
    9. Avinadav, Tal & Chernonog, Tatyana & Meilijson, Isaac & Perlman, Yael, 2022. "A consignment contract with revenue sharing between an app developer and a distribution platform," International Journal of Production Economics, Elsevier, vol. 243(C).
    10. Xuesong Zhao & Jieyi Pan & Yongtao Song, 2018. "Dependence on Supplier, Supplier Trust and Green Supplier Integration: The Moderating Role of Contract Management Difficulty," Sustainability, MDPI, vol. 10(5), pages 1-14, May.
    11. Saghiri, Soroosh & Wilding, Richard, 2021. "On the effectiveness of supplier development programs: The role of supply-side moderators," Technovation, Elsevier, vol. 103(C).

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