Study On Manufacture’s Procurement Strategy Under Supply Disruption Risk

The globalization of market and resource procurement today has made supply chain play acrucial role in manufacturing and everyday life. More and more companies rely on suppliers forraw materials or spare parts, and outsource some activities even the core ones. On one hand, itbrings efficiency to the companies with low cost. However, it has no doubt that the companies losesome control over relative activities, which expose themselves to various risks. Under the supplyuncertainty and many kinds of potential risk factors, single-sourcing strategy can no longerguarantee the safety of the supply network. This paper concerns about one main risk of supplydisruption management, which is supply disruption. We study a supply chain composed of onemanufacture, one main supplier and one backup supplier in one-period situation, with the mainsupplier having low cost, large capacity yet supply disruption risk while the backup supplierprovides a reliable yet more expensive supply. This paper reflects the research in the followingthree aspects:(1) Under stochastic demand, relationship analysis of players is conducted first. We studythe manufacture’s procurement strategy from perspectives of pursuing minimum cost thenmaximum profit. We relax the neural risk assumption for the manufacturer and try to find theoptimal strategy considering the manufacturer is risk aversion, as well as the response of backupsupplier. We find that the manufacturer has two sourcing modes: either emergency procurementmode or dual-sourcing procurement mode, in which the position of backup supplier differs.(2) Considering the supplier’s disruption is symmetric information, we study on themanufacturer’s optimal procurement strategy under the emergency procurement mode anddual-sourcing procurement mode alternatively, and draw some conclusions about the influence ofrisk, cost and other factors in the procurement strategy.(3) Since the supply risk information is always asymmetric in reality, we employ theMechanism design theory to study how the manufacturer could reveal the true disruption riskinformation by providing different transfer payment contracts to the main supplier, and obtainrelative optimal procurement strategy. Further analysis of the results is conducted also.