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Supply diversification with isoelastic demand

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  • Li, Tao
  • Sethi, Suresh P.
  • Zhang, Jun

Abstract

We study a firm׳s sourcing strategy when facing two unreliable suppliers and a price-dependent isoelastic demand. At optimality, the firm always orders at least from the low-cost supplier. The firm also orders from the high-cost supplier if and only if the effective purchase cost from the low-cost supplier is greater than the actual purchase cost from the high-cost supplier. We also find that when the firm orders from both suppliers, the total order quantity decreases as the correlation between the suppliers׳ capacities increases.

Suggested Citation

  • Li, Tao & Sethi, Suresh P. & Zhang, Jun, 2014. "Supply diversification with isoelastic demand," International Journal of Production Economics, Elsevier, vol. 157(C), pages 2-6.
    • Handle: RePEc:eee:proeco:v:157:y:2014:i:c:p:2-6
    DOI: 10.1016/j.ijpe.2014.07.014
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    References listed on IDEAS

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    Cited by:

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    2. Rubio-Herrero, Javier & Baykal-Gürsoy, Melike, 2020. "Mean-variance analysis of the newsvendor problem with price-dependent, isoelastic demand," European Journal of Operational Research, Elsevier, vol. 283(3), pages 942-953.
    3. Ágota Bányai & Tamás Bányai & Béla Illés, 2017. "Optimization of Consignment-Store-Based Supply Chain with Black Hole Algorithm," Complexity, Hindawi, vol. 2017, pages 1-12, September.
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    6. Yixin Zhang & Xifu Wang, 2019. "Procurement Strategy with Backup Sourcing under Stochastic Supply Risk," Complexity, Hindawi, vol. 2019, pages 1-15, March.

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