Analysis of global brands' green procurement strategy: Co-opetitive local sourcing vs. overseas sourcing under delivery disruption

Recently, black swan events, such as the Covid-19 pandemic and the Russia-Ukraine war, have caused disrup-tions for the local brand with overseas procurement (BOP) who traditionally purchase remanufactured com-ponents globally. This induces the BOP to find a local alternative supplier, although the remanufactured components without supply disruption can be of high price, and the local supplier has a self-branded business. In this paper, we consider a BOP's strategic sourcing decisions from a local supplier with self-branded end products (LSP) who sells remanufactured components. We focus on the BOP's incentives toward such a co-opetitive relationship and the LSP's willingness to sell remanufactured components to the BOP. We find that having two suppliers may induce a component price war but the component price will not become too low when the probability of overseas supply disruption is high. Interestingly, we find that the BOP will allocate a low pro-portion of component purchasing orders to the LSP when it faces a high probability of overseas supply disruption. In contrast, the LSP has the incentive to sell remanufactured components to the BOP when the probability of overseas supply disruption is in a moderate range. If the BOP's remanufactured component quality requirement is high, or the probability of overseas supply disruption is low, the LSP might even have a profit loss when selling components to the BOP.

Automated summary

This paper examines the strategic sourcing decisions of a local brand (BOP) when purchasing remanufactured components from a local supplier (LSP). The study finds that the BOP tends to decrease its purchasing orders from the LSP when the probability of overseas supply disruption is high, while the LSP is willing to sell components to the BOP when the probability is in a moderate range.