Single versus multiple sourcing in the presence of risks

Single versus multiple sourcing in the presence of risks

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Article ID: iaor20071716
Country: United Kingdom
Volume: 57
Issue: 3
Start Page Number: 250
End Page Number: 261
Publication Date: Mar 2006
Journal: Journal of the Operational Research Society
Authors: ,
Keywords: supply & supply chains, optimization
Abstract:

This paper relies on a decision-tree approach to aid a buying firm in determining the optimal size of its supply base in the presence of risks. The risk under consideration refers to any unpredictable operations interruptions caused by all suppliers being unavailable to satisfy the buying firm's demand. The relationship between the levels of risk and associated trade-offs is captured by a decision-tree model, from which the expected cost function is formulated. The exact or approximate optimal solutions for various scenarios, as well as their sensitivity, are obtained and examined.

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