Contingent Strategies for Mitigating Supply Disruptions With Backup Supplier and Information Acquirement

Contingent Strategies for Mitigating Supply Disruptions With Backup Supplier and Information Acquirement

Li Xin-jun (School of Economic and Management, Yantai University, Yantai City, China), Zhang Lin-qi (School of Economic and Management, Yantai University, Yantai City, China) and Liu Xing-hua (School of Economic and Management, Yantai University, Yantai City, China)
DOI: 10.4018/IJISSCM.2018040102

Abstract

This article describes pervasive supply disruptions and their impacts on supply chain performance. The retailer sources from two suppliers, one supplier is subject to disruptions and the other supplier is perfectly reliable, but more expensive. According to availability of the disruption information, the authors present four information acquirement models. The research conclusions are as follows: The effect of backup supplier is reduced with the increases of reliability coefficient; The value of information is more sensitive to reliability coefficient but less sensitive to potential market capacity; The earlier the information is available, the higher the profit of vendor is; The value of information is lower when reliability coefficient is close to 0 or 1, while information value is significant when reliability coefficient is 0.5; predetermined amount of backup supplier has nothing to do with the cost of strategic supplier, and predetermined amount of strategic supplier is also no connection with backup supplier's predetermined cost and execution cost.
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1. Introduction

The large number of well-publicized supply-chain disruptions in recent years has heightened awareness of the significant risks posed by supply failure and the need for effective disruption-management strategies. Extreme weather disasters continued deterioration of the global environment brought about and political conflicts caused by man-made terrorist incidents often occur, which have brought tremendous shock for normal operations of many companies. In 2000, lightning fire in Philips's semiconductor plant lead to the Ericsson and Nokia's supply disruptions for several weeks. In 2011, Japanese Fukushima earthquake caused automobile enterprises such as Honda Nissan suspend production. In a decade, unexpected events frequently occur in China, e.g. the south area of frozen disaster and the Wenchuan earthquake in 2008, the Yushu earthquake in 2010, the Yunnan earthquake in 2014, Shanghai Husi food safety accident. Under the complicated and changeable environment, the characteristics of cross-regional and multi-link among supply chain participants make the supply chain easily influenced by many unexpected events from the external environment and internal system, resulting in supply disruption.

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