Dual sourcing with nonidentical suppliers

The authors analyze a dual-sourcing inventory model with exponential lead times and constant unit demand in which the order quantity is split in some proportion between two sources of supply. Unlike earlier studies, they do not require that the two sources be identical in terms of the lead-time parameters or the supply prices. The authors compare the expected total annual costs for the two-source and the traditional single-source models over a wide range of parameter values. They confirm the findings of earlier studies that, under stochastic lead times, dual sourcing yields savings in holding and shortage costs that could outweigh the incremental ordering costs. With this more general model, the authors demonstrate that savings from dual sourcing are possible even where the mean or the variability of the second source is higher.