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Title: Supplier ratings and dynamic sourcing strategies to mitigate supply disruption risks
Authors: Basu, Preetam
Ghosh, Soumita
Kumar, Milan
Keywords: Sourcing strategies
Dual sourcing
Supply chain risk management
Vendor rating
Stochastic dynamic programming
Issue Date: Mar-2019
Publisher: Indian Institute of Management Calcutta, Kolkata
Series/Report no.: Vol.46;No.1
Abstract: The selection of a sourcing strategy plays a vital role in managing supply disruptions. The choice regarding the number of suppliers is one of the most important decisions in mitigating supply side risks. In this paper, we analyze single versus dual sourcing strategies of a buying organization in a multi-period setting where the low-cost supplier is exposed to disruption risks. We incorporate supplier ratings based on the performance of the suppliers in a dynamic setting and use them in the sourcing decisions. We develop a stochastic dynamic programming model to formulate the dual-sourcing problem. Our results show that dual sourcing provides maximum cost–benefit under high probability of supply disruption and high-cost differential between the reliable and the unreliable suppliers. The findings of this paper will help supply chain managers formulate optimal sourcing strategies when exposed to supply disruption risks by integrating performance metrics of the suppliers dynamically.
Description: Preetam Basu, Indian Institute of Management Calcutta, Diamond Harbour Road, Kolkata, West Bengal, 700 104, India; Soumita Ghosh, Xavier School of Management (XLRI), Jamshedpur, Jharkhand, 831001, India; Milan Kumar, Indian Institute of Management Visakhapatnam, Andhra University Campus, Chinna Waltair Road, Visakhapatnam, AP, 530003, India
Issue Editor – Manisha Chakrabarty
ISSN: 0304-0941 (print version) ; 2197-1722 (electronic version)
Appears in Collections:Issue 1, March 2019

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