Dynamic sourcing strategies for supply disruptions under consumer stockpiling

Abstract

This paper considers a make-to-order system where production gets disrupted due to a random supply failure. To avoid potential stock-out risk and responding price increase during disruption, customers might decide to stockpile extra units for future consumption. We investigate the contingent sourcing strategy for the manufacturer to cope with the disruption. To this end, we first discuss the optimal post-disruption stockpiling decision for customers. In view of expected disruption duration, price rise, and inventory holding cost, three types of stockpiling behavior are analytically provided for the customers: non-stockpiling, gradual stockpiling, and instantaneous stockpiling. Next, a model is formulated to optimize the joint decision of contingent sourcing time and quantity, with the objective of maximizing profit expectation. Finally, by conducting numerical analysis, we generate further insights into the role of relative factors and provide specific managerial suggestions on how to adapt dynamic contingent sourcing strategies to alleviate different disruptions, under different market environments and customer behaviors.

Electricity Procurement Strategies under Supply Disruption and Price Fluctuation

“…ey proposed a passive-backup strategy and a recovery-backup strategy to guide the mitigation approaches as the disruptions continue. Li et al [23] discussed the optimal post-disruption decision for customers.…”

Guest editorial on “data-driven operations management”

“…In the presence of transportation disruptions, which will lead to uncontrollable delivery lead time, the authors in the second paper, "Strategic rationing and freshness keeping of perishable products under transportation disruptions and demand learning" [2], studied strategic rationing and freshness keeping of perishable products. To answer whether it is always optimal to satisfy those customers who are willing to purchase during disruption, the authors first presented the dynamics of post-disruption inventory and demand which takes into account the demand learning effect facilitated from negative word-of-mouth during disruption and the demand recovery after disruption ends, and then developed a model to achieve the optimal selling strategy for maximizing postdisruption profit which identifies the joint decision of the rationing period and freshness-keeping effort.…”

Dual‐Source Procurement Strategies of Emergency Materials Considering Risk Attitudes

“…Terefore, while ensuring sufcient emergency materials reserve, how to determine the optimal amount of emergency materials reserve, reduce emergency materials waste, and avoid the problem of overdue emergency materials occupying inventory has become a new challenge for government organizations to purchase and store emergency materials. As a result, based on the option contract, many scholars have established an emergency procurement model considering the reserve period, so as to optimize the emergency materials reserve mechanism [11][12][13][14].…”