The optimal number of suppliers considering the costs of individual supplier failures
This paper utilizes the decision tree approach to determine the optimal number of suppliers in the presence of supplier failure risks. Previous proposed models have considered only two states of nature: all suppliers fail to deliver and not all suppliers fail to deliver. In practice, however, there is clearly a partial loss associated with the failure of any individual supplier. We present models that allow a more realistic decision-making process by taking into consideration the independent risks of individual supplier failures when the probability of failure for each of the suppliers is equal as well as the case where the probability of failure from each of the suppliers is not equal. We also consider various levels of supplier failure probability and possible procurement or operating cost savings gained from using less reliable suppliers. The results indicate that when suppliers are highly reliable, sole sourcing is the lowest cost approach under all experimental conditions. However, as the suppliers become less reliable, additional suppliers may be required to obtain the lowest cost. Finally, it was shown that only in the extreme conditions of unreliable suppliers, high loss to operational cost per supplier, and low ability to mitigate the failure from a partial set of suppliers, having a large number of suppliers is an effective strategy.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 35 (2007)
Issue (Month): 1 (February)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/375/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lee, Hau L. & Whang, Seungjin, 2005. "Higher supply chain security with lower cost: Lessons from total quality management," International Journal of Production Economics, Elsevier, vol. 96(3), pages 289-300, June.
- Berger, Paul D. & Gerstenfeld, Arthur & Zeng, Amy Z., 2004. "How many suppliers are best? A decision-analysis approach," Omega, Elsevier, vol. 32(1), pages 9-15, February.
- Crama, Y. & Pascual J., R. & Torres, A., 2004. "Optimal procurement decisions in the presence of total quantity discounts and alternative product recipes," European Journal of Operational Research, Elsevier, vol. 159(2), pages 364-378, December.
When requesting a correction, please mention this item's handle: RePEc:eee:jomega:v:35:y:2007:i:1:p:104-115. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.