Using anticipatory orders to manage disruption risk over a short product life cycle

Sunil Chopra, Vadim Glinskiy and Florian Lücker

European Journal of Operational Research, 2024, vol. 319, issue 1, 153-167

Abstract: We study the impact of supply disruptions on sourcing strategies when product life cycles are short and future demand depends on current sales. We introduce the concept of order policies with anticipatory orders where some or all of orders with the unreliable supplier in future periods are moved to an earlier period. Using a 2-period model, we show that despite incurring additional holding cost when inventory is carried to a future period, anticipatory orders from the unreliable supplier are valuable when dealing with disruption risk when future demand depends on current sales. We find that anticipatory orders are less pronounced when future demand is more independent of current sales. We show that anticipatory orders from the unreliable supplier continue to be optimal for a range of disruption probabilities even when we include a responsive and reliable supplier.

Keywords: Disruption; Risk mitigation strategies; Supply chain; Demand sales dependence (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:319:y:2024:i:1:p:153-167

DOI: 10.1016/j.ejor.2024.05.040

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