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Sourcing Strategies to Manage Supply Disruptions

  • Amanda J. Schmitt
  • Brian Tomlin
Chapter

Abstract

Supplier diversification and backup sourcing offer alternatives to stockpiling inventory as a means of mitigating disruption risks. In this chapter, we introduce some simple models to analyze and explore the performance of these sourcing strategies. The effectiveness of diversification depends largely on the number of suppliers, the possibility of disruption correlation, and the available spare capacity at suppliers. Most of the benefits are achieved with a small number of suppliers. The effectiveness of backup sourcing depends largely on the cost and availability of the backup source, with availability being measured as response time and capacity provided. When choosing the appropriate strategy, managers need to account for all the significant factors that influence performance, including the disruption profile, inventory costs, the fixed and variable supplier costs, capacities, response times, and disruption correlation. Crafting the best strategy relies on sound judgment aligned with suitable analysis.

Keywords

Supply Chain Acceptance Strategy Spare Capacity Diversification Strategy Supply Disruption 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer-Verlag London Limited 2012

Authors and Affiliations

  1. 1.Center for Transportation and LogisticsMassachusetts Institute of TechnologyCambridgeUSA
  2. 2.Tuck School of Business at DartmouthHanoverUSA

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