Skip to main content
SpringerLink
Log in

Optimal procurement strategies from suppliers with random yield and all-or-nothing risks

  • Published:
Annals of Operations Research Aims and scope Submit manuscript

Abstract

Supply uncertainty has been elevated to a strategic level concern in driving supply chain success. This paper considers that a firm faces a deterministic demand and procures from two unreliable suppliers: one is subject to a random disruption and might deliver all or nothing of the firm’s order, while the other one exposes to a random yield risk for the firm’s order. We explore the models of no recourse and ordering with recourse, and derive optimal solutions for each model. We provide the conditions under which single or dual sourcing strategy should be used. We also compare the decisions and profits among different models through computational experiments and find that it is more beneficial to order from the relatively expensive supplier as a backup source.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8
Fig. 9
Fig. 10
Fig. 11

Similar content being viewed by others

References

  • Arreola-Risa, A., & De Croix, G. A. (1998). Inventory management under random disruptions and partial back-orders. Naval Research Logistics, 45, 687–703.

    Article  Google Scholar 

  • Babich, V. (2006). Vulnerable options in supply chains: effects of supplier competition. Naval Research Logistics, 53(7), 656–673.

    Article  Google Scholar 

  • Babich, V., Burnetas, A. N., & Ritchken, P. H. (2007). Competition and diversification effects in supply chains with supplier default risk. Manufacturing Service and Operations Management, 9(2), 123–146.

    Article  Google Scholar 

  • Bielecki, T., & Kumar, P. R. (1988). Optimality of zero-inventory policies for unreliablemanufacturing systems. Operations Research, 36, 532–541.

    Article  Google Scholar 

  • Chao, X., Gong, X., & Zheng, S. (2014). Optimal pricing and inventory policies with reliable and random-yield suppliers: Characterization and comparison. Annals of Operations Research. doi:10.1007/s10479-014-1547-0.

  • Chen, W., Feng, Q., & Seshadri, S. (2013). Sourcing from suppliers with random yield for price-dependent demand. Annals of Operations Research, 208, 557–579.

    Article  Google Scholar 

  • Chopra, S., Reinhardt, G., & Mohan, U. (2007). The importance of decoupling recurrent and disruption risks in a supply chain. Naval Research Logistics, 54(5), 544–555.

    Article  Google Scholar 

  • Dada, M., Petruzzi, N., & Schwarz, L. (2007). A newsvendors procurement problem when suppliers are unreliable. Manufacturing Service and Operations Management, 9, 9–32.

    Article  Google Scholar 

  • Federgruen, A., & Yang, N. (2009). Optimal supply diversification under general supply risks. Operations Research, 57, 1451–1468.

    Article  Google Scholar 

  • Grosfeld-Nir, A., & Gerchak, Y. (2004). Multiple lot-sizing in production to order with random yields: Review of recent advances. Annals of Operations Research, 126, 43–69.

    Article  Google Scholar 

  • Gupta, D., & Cooper, W. L. (2005). Stochastic comparisons in production yield management. Operations Research, 53, 377–384.

    Article  Google Scholar 

  • Keren, B. (2009). The single-period inventory problem: Extension to random yield from the perspective of the supply chain. Omega, 37, 801–810.

    Article  Google Scholar 

  • Li, X., Li, Y., & Cai, X. (2012). A note on the random yield from the perspective of the supply chain. Omega: The International Journal of Management Science, 40, 601–610.

    Article  Google Scholar 

  • Qin, F., & Rao, U. (2014). Role of random capacity risk and the retailer in decentralized supply chains with competing suppliers. Decision Sciences, 45(2), 255–279.

    Article  Google Scholar 

  • Sheffi, Y. (2005). The resilient enterprise: Overcoming vulnerability for competitive advantage. Massachusetts: The MIT Press.

    Google Scholar 

  • Tang, S. Y., & Kouvelis, P. (2011). Supplier diversification strategies in the presence of yield uncertainty and retailer competition. Manufacturing and Service Operations Management, 13(4), 439–451.

    Article  Google Scholar 

  • Tomlin, B. (2006). On the value of mitigation and contingency strategies for managing supply-chain disruption risks. Management Science, 52(5), 639–657.

    Article  Google Scholar 

  • Wang, Y., Gilland, W., & Tomlin, B. (2010). Mitigating supply risk: Dual sourcing or process improvement? Manufacturing and Service Operations Management, 12, 489–510.

    Article  Google Scholar 

Download references

Acknowledgments

This work was supported by the National Natural Science Foundation of China (NSFC) Nos. 71002077 and 71372002, and the Fundamental Research Funds for the Central Universities No. NKZXB1228.

Author information

Authors and Affiliations

  1. College of Economic and Social Development, Nankai University, Tianjin, 300071, China

    Xiang Li

Authors
  1. Xiang Li
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Xiang Li.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Li, X. Optimal procurement strategies from suppliers with random yield and all-or-nothing risks. Ann Oper Res 257, 167–181 (2017). https://doi.org/10.1007/s10479-015-1923-4

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10479-015-1923-4

Keywords

Search

Navigation