Risk, Financing and the Optimal Number of Suppliers

Babich, Volodymyr; Aydın, Göker; Brunet, Pierre Yves; Keppo, Jussi; Saigal, Romesh

doi:10.1007/978-0-85729-778-5_8

Cited by 48 publications

(16 citation statements)

References 37 publications

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“…This random yield might be due to evolving supply processes in that supplier suffers from capacity shortfalls or poor quality and modelled by continuous distribution. The normally distributed random yield factor has been used by many researchers for example, Anupindi and Akella (1993), Agrawal and Nahmias (1997) and Babich et al (2010). Section 4.1 provides optimality properties of this special case.…”

Section: Solution Methodologymentioning

confidence: 99%

Impact of risk aversion and backup supplier on sourcing decisions of a firm

Merzifonluoğlu

2015

International Journal of Production Research

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This study focuses on a newsvendor problem with multiple suppliers, considering the risk-neutral and risk-averse objectives in a mean-risk optimisation model. The firm first decides order quantities from the primary (unreliable) suppliers and reserve capacity from the secondary (reliable) backup supplier. After the state of its primary suppliers and customer demand is revealed, the firm purchases from the available suppliers and uses the backup supplier subject to the reserved capacity. For the special case of normal distribution and risk-neutral objective, optimality properties were developed. A comprehensive numerical study examines the sensitivity of the sourcing strategies of firms to risk, shortage cost, demand uncertainty, salvage value, and capacity reserve options; various managerial insights are offered based on this.

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Section: Solution Methodologymentioning

confidence: 99%

Impact of risk aversion and backup supplier on sourcing decisions of a firm

Merzifonluoğlu

2015

International Journal of Production Research

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“…, and Babich et al. ). We refer the readers to Babich and Tang () for an extensive review of these studies.…”

Section: Literature Reviewmentioning

confidence: 96%

Sourcing with Deferred Payment and Inspection under Supplier Product Adulteration Risk

Rui

Lai

2015

Production and Operations Management

112

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W e study the deferred payment and inspection mechanisms for mitigating supplier product adulteration, with endogenous procurement decision and general defect discovery process. We first derive the optimal deferred payment contract, which reveals that either entire or partial deferral can arise, depending on the moral hazard severity and the information accumulation rate. Because of the supplier's incentive to adulterate, the optimal procurement quantity under deferred payment generally is smaller than the first-best quantity. We then investigate the inspection mechanism and characterize the equilibrium. We find that under the inspection mechanism, the optimal procurement quantity is no less than the first best. A comparison between these two mechanisms shows that the deferred payment mechanism generally can outperform the inspection mechanism when either the market size is small or the profit margin is low. However, we find that these two mechanisms can also be complementary, for which we characterize a necessary condition.

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“…Yang et al (2009) had grouped the tools for managing supply chain risk into four main themes: multi-sourcing (e.g., Anupindi and Akella, 1993;Babich et al, 2005Babich et al, , 2007, alternative supply sources and backup production (e.g., Serel et al, 2001;Kouvelis and Milner, 2002), flexibility (e.g., Van Mieghem, 2003;Tomlin and Wang, 2005) and supplier selection (e.g., Deng and Elmaghraby, 2005). On the other hand, Microsoft and Arthur Anderson developed a supply risk assessment process-Comprehensive Outsource Risk Evaluation (CORE) system in which Risk is analyzed ''objectively''.…”

Section: Supply Chain Risk Managementmentioning

confidence: 99%