Article ID: | iaor200968884 |
Country: | United Kingdom |
Volume: | 5 |
Issue: | 2 |
Start Page Number: | 131 |
End Page Number: | 151 |
Publication Date: | May 2009 |
Journal: | International Journal of Operational Research |
Authors: | Sriskandarajah Chelliah, Rajamani Divakar, Dawande Milind, Manoj UV |
Keywords: | manufacturing industries, risk |
A Dallas-based telephone manufacturer, that imports semi-finished products from a supplier in Malaysia, wants to develop a risk mitigation plan to minimise the operational risk it may face due to supply disruptions at a US port. Disruptions at the port can render the supply unavailable for a considerable period of time, resulting in a loss of business. We analyse two sourcing policies that evaluate the trade-off between risk-inventory cost and expected loss of business from disruptions. We examine the sensitivity of the policies to the cost parameters and demonstrate how a payment contract affects the selection of a sourcing policy.