Single Versus Multiple Supplier Sourcing Strategies

Gerard J. Burke, Janice E. Carrillo, Asoo J. Vakharia

Research output: Contribution to journalArticlepeer-review

236 Scopus citations

Abstract

Successful supply chain management necessitates an effective sourcing strategy to combat uncertainties in both supply and demand. In particular, supply disruption results in excessive downtime of production resources, upstream and downstream supply chain repercussions, and eventually a loss in the market value of the firm. In this paper we analyze single period, single product sourcing decisions under demand uncertainty. Our approach integrates product prices, supplier costs, supplier capacities, historical supplier reliabilities and firm specific inventory costs. A unique feature of our approach is the integration of a firm specific supplier diversification function. We also extend our analysis to examine the impact of minimum supplier order quantities. Our results indicate that single sourcing is a dominant strategy only when supplier capacities are large relative to the product demand and when the firm does not obtain diversification benefits. In other cases, we find that multiple sourcing is an optimal sourcing strategy. We also characterize a non-intuitive trade-off between supplier minimum order quantities, costs, and supplier reliabilities. Finally, we examine the robustness of our results through an extensive numerical analysis of the key parameters of our model.

Original languageAmerican English
JournalEuropean Journal of Operational Research
Volume182
DOIs
StatePublished - Oct 1 2007

Keywords

  • Logistics
  • Purchasing
  • Supply chain management

DC Disciplines

  • Operations and Supply Chain Management
  • Business Administration, Management, and Operations

Fingerprint

Dive into the research topics of 'Single Versus Multiple Supplier Sourcing Strategies'. Together they form a unique fingerprint.

Cite this