4.5 Article

Managing disruption risk in competing multitier supply chains

Journal

INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH
Volume 29, Issue 6, Pages 3622-3656

Publisher

WILEY
DOI: 10.1111/itor.13136

Keywords

supply disruption risk; multitier supply chain; sourcing strategy; Cournot competition

Funding

  1. Research Grants Council of Hong Kong SAR, China [T32-101/15-R]
  2. National Social Science Foundation of China [17ZDA083]
  3. Social Science Foundation of the Chinese Education Commission [21YJC630173]
  4. Wuhan University of Technology [40120596]

Ask authors/readers for more resources

This paper examines the sourcing problem of two competing manufacturers in two supply chains and investigates the impact of upstream supply chain structures on manufacturers' performance. By comparing two representative configurations, the authors derive the manufacturers' equilibrium sourcing strategies and demonstrate that competition decreases the incentives for dual sourcing.
This paper studies the sourcing problem of two competing manufacturers in two supply chains. Each supply chain consists of a Tier 0 manufacturer, a Tier 1 supplier, and a pair of Tier 2 suppliers with different disruption probabilities. The two manufacturers are engaged in Cournot competition. The two Tier 1 suppliers that serve different manufacturers may procure from different or the same Tier 2 suppliers. We investigate the impact of upstream supply chain structures on the manufacturers' performance by comparing two representative configurations: the paralleled supply chain configuration, which has no overlap in Tier 2 suppliers, and the overlapped supply chain configuration, which has the same Tier 2 suppliers. We derive the manufacturers' equilibrium sourcing strategies in the two configurations. When the more reliable Tier 2 supplier is quite reliable or the more unreliable Tier 2 supplier is very unreliable, both manufacturers offer a low wholesale price to induce their Tier 1 suppliers for single sourcing. When the more reliable Tier 2 supplier is not sufficiently reliable and the more unreliable Tier 2 supplier is not that unreliable, both manufacturers offer a high wholesale price to induce their Tier 1 suppliers for dual sourcing. There are also certain conditions under which one manufacturer chooses the high-price sourcing strategy and the other one chooses the low-price sourcing strategy. Besides, we demonstrate that competition decreases the manufacturers' incentives to induce dual sourcing. In a more competitive market, the manufacturers prefer less overlap in their upper suppliers. Finally, we conduct several extensions to show the robustness of our findings.

Authors

I am an author on this paper
Click your name to claim this paper and add it to your profile.

Reviews

Primary Rating

4.5
Not enough ratings

Secondary Ratings

Novelty
-
Significance
-
Scientific rigor
-
Rate this paper

Recommended

No Data Available
No Data Available