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Dual sourced supply chains: the discount supplier option

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  • Ganeshan, Ram
  • Tyworth, John E.
  • Guo, Yuanming

Abstract

In this paper, we examine the dynamics of a supply chain that has the option of using two suppliers - one reliable, and the other unreliable. We characterize the unreliable supplier with long lead-time mean and variance. Although the use of the unreliable supplier might potentially warrant higher inventory and transportation costs, it is attractive because of the willingness of the supplier to provide a discount on the purchase price. We analyze the cost economics of two suppliers in a broader inventory-logistics framework, one that includes in-transit inventories and transportation costs. In this broader perspective, we provide a simple heuristic and sample exchange curves to determine: (i) if the order should be split between the suppliers; and (ii) if the order is split, the amount of discount and the fraction ordered to the secondary supplier to make order-splitting a worth-while policy. ©

Suggested Citation

  • Ganeshan, Ram & Tyworth, John E. & Guo, Yuanming, 1999. "Dual sourced supply chains: the discount supplier option," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 35(1), pages 11-23, March.
    • Handle: RePEc:eee:transe:v:35:y:1999:i:1:p:11-23
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    Citations

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    Cited by:

    1. Kawtummachai, Ruengsak & Van Hop, Nguyen, 2005. "Order allocation in a multiple-supplier environment," International Journal of Production Economics, Elsevier, vol. 93(1), pages 231-238, January.
    2. Cheaitou, Ali & van Delft, Christian, 2013. "Finite horizon stochastic inventory problem with dual sourcing: Near myopic and heuristics bounds," International Journal of Production Economics, Elsevier, vol. 143(2), pages 371-378.
    3. Svoboda, Josef & Minner, Stefan & Yao, Man, 2021. "Typology and literature review on multiple supplier inventory control models," European Journal of Operational Research, Elsevier, vol. 293(1), pages 1-23.
    4. Riezebos, Jan, 2006. "Inventory order crossovers," International Journal of Production Economics, Elsevier, vol. 104(2), pages 666-675, December.
    5. Wout Dullaert & Bert Vernimmen & El‐houssaine Aghezzaf & Birger Raa, 2006. "Revisiting Service‐level Measurement for an Inventory System with Different Transport Modes," Transport Reviews, Taylor & Francis Journals, vol. 27(3), pages 273-283, July.
    6. Pérez, Cinthia & Geunes, Joseph, 2014. "A (Q,R) inventory replenishment model with two delivery modes," European Journal of Operational Research, Elsevier, vol. 237(2), pages 528-545.
    7. Minner, Stefan, 2003. "Multiple-supplier inventory models in supply chain management: A review," International Journal of Production Economics, Elsevier, vol. 81(1), pages 265-279, January.
    8. Hsieh, Chung-Chi & Wu, Cheng-Han, 2009. "Coordinated decisions for substitutable products in a common retailer supply chain," European Journal of Operational Research, Elsevier, vol. 196(1), pages 273-288, July.
    9. Niu, Baozhuang & Dong, Jian & Liu, Yaoqi, 2021. "Incentive alignment for blockchain adoption in medicine supply chains," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 152(C).
    10. Zeinab Sazvar & Mohammad Reza Akbari Jokar & Armand Baboli, 2014. "A new order splitting model with stochastic lead times for deterioration items," International Journal of Systems Science, Taylor & Francis Journals, vol. 45(9), pages 1936-1954, September.

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