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Supplier ratings and dynamic sourcing strategies to mitigate supply disruption risks

Author

Listed:
  • Preetam Basu

    (Indian Institute of Management Calcutta)

  • Soumita Ghosh

    (Xavier School of Management (XLRI))

  • Milan Kumar

    (Indian Institute of Management Visakhapatnam)

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.

Suggested Citation

  • Preetam Basu & Soumita Ghosh & Milan Kumar, 2019. "Supplier ratings and dynamic sourcing strategies to mitigate supply disruption risks," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 46(1), pages 41-57, March.
    • Handle: RePEc:spr:decisn:v:46:y:2019:i:1:d:10.1007_s40622-019-00204-x
    DOI: 10.1007/s40622-019-00204-x
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    Cited by:

    1. 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.

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