Comparision Of Single And Multiple Sourcing Strategies And Order Allocation Based On Supply Disruption

As the global supply chain management trends to lean production and globalization, the supply chain has been extended in both time and space, but meantime its complexity and fragility is raised and the probability of supply chain disruption is also increased. Currently,study on supply chain risk management has become a hotspot, but it is still in a fledgling stage. Qualitative research of identification and assessment of supply chain risk has been fruitful and most quantitative research has done based on supply chain coordination and emergency management theory, but the research of procurement strategy research based on supply disruption risk is still lacking.Firstly, this paper studies on choosing single souring or multiple sourcing strategy based on supply disruption risk. Since single souring and multiple sourcing strategies each offer certain advantages in risky environments, a correct evaluation from a risk management perspective is needed. This paper proposes the Real Options approach for valuing the probabilistic benefits of multiple sourcing under the supply disruption risk compared with single sourcing. A computational model was developed based on the Monte Carlo simulation. The result shows the (probabilistic) advantages of adopting the multiple sourcing strategies under supply disruption. And then the paper indicates some sensitive analysis about some parameters. Its managerial implications represent a valid support for the decision-making process in the presence of uncertainty.Secondly, this paper studies on the optimal order quantity and order allocation under multiple-sourcing strategy. The research is positive since the suppliers may have lower cost or higher stability. This paper proposes the optimal order quality and order distribution under multiple souring strategies, from the perspective of maximization of revenues, based on the risk of supply disruption. We demonstrate the optimal order quantity and allocation though numerical examples, when the demand is evenly distributed. The results indicate that it is more profitable to select heterogeneous suppliers than homogeneous suppliers under multiple–sourcing strategy.