Strategic cooperation with a backup supplier for the mitigation of supply disruptions
Zhe Yin and
Chen Wang
International Journal of Production Research, 2018, vol. 56, issue 12, 4300-4312
Abstract:
We study optimal sourcing decisions for a firm with a dedicated supplier and a backup supplier. The dedicated supplier charges a lower wholesale price but faces a potential disruption risk. The backup supplier is assumed to be perfectly reliable but charges a higher wholesale price. The primary question we address is how the firm should cooperate with the backup supplier to hedge against the disruption risk. We consider three common cooperation options: advance purchase, reservation and contingency purchase. Our basic results show that the firm should choose advance purchase strategy if the disruption probability is high, while contingency purchase strategy benefits the firm more if the disruption probability is low. Under an intermediate disruption probability, the firm should choose reservation strategy only if the reservation fee is sufficiently low. Then, we explore the optimal backup strategy under partial disruption risk. The results show that the advance purchase and the reservation strategy should be adopted more widely when the dedicated supplier guarantees a relatively high yield rate after disruption.
Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (6)
Downloads: (external link)
http://hdl.handle.net/10.1080/00207543.2017.1410246 (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:taf:tprsxx:v:56:y:2018:i:12:p:4300-4312
Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/TPRS20
DOI: 10.1080/00207543.2017.1410246
Access Statistics for this article
International Journal of Production Research is currently edited by Professor A. Dolgui
More articles in International Journal of Production Research from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().