Production and pricing policies in dual sourcing supply chains

Doğan A. Serel

Transportation Research Part E: Logistics and Transportation Review, 2015, vol. 76, issue C, 1-12

Abstract: We analyze optimal production and pricing strategies in the single period (newsvendor) dual sourcing problem that entails local and offshore suppliers. The local supplier is used reactively as an emergency source following the realization of random demand. A multiplicative demand model is employed. We show that dual sourcing flexibility may decrease optimal price when emergency supply cost is sufficiently low. We also find that optimizing price for a given stocking factor yields a price which is always higher than the price in the case where both price and stocking factor are selected to be jointly optimal.

Keywords: Newsboy; Emergency order; Drop shipping; Multiplicative error; Price-setting newsvendor; Fast-ship option (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (13)

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DOI: 10.1016/j.tre.2015.01.007

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