 Leveraging concurrent sourcing for risk mitigation and pricingThomas B. Cassidey, Nickolas Freeman and Sharif Melouk Omega, 2022, vol. 113, issue C Abstract: We investigate a setting where a firm may choose to make and buy components used to manufacture finished goods and determine the optimal decision strategy under supply and demand risk. We assume supply risk is of an all-or-nothing manner, i.e., either the supply is totally disrupted or not. We show that the optimal strategy follows a complex threshold structure dictated by cost and capacity parameters and the component and finished product inventories. We use our results regarding the manufacturing firm’s optimal strategy to investigate the effects of concurrent sourcing on the supplier’s optimal pricing strategy. In particular, we investigate the manufacturer’s decision to share information regarding their in-house production capabilities. We find that such information sharing can benefit both parties. Specifically, an improved understanding of the manufacturer’s capabilities can result in the supplier offering lower prices to improve competitiveness. Further, we show that increasing capacity at the manufacturer may increase outsourcing in relation to insourcing. Keywords: Supply chain risk management; Concurrent sourcing; Nonlinear optimization; Information sharing (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jomega:v:113:y:2022:i:c:s030504832200130x Ordering information: This journal article can be ordered from DOI: 10.1016/j.omega.2022.102723 Access Statistics for this article Omega is currently edited by B. Lev More articles in Omega from Elsevier |
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