Supply Diversification with Responsive Pricing

Li, Tao; Sethi, Suresh P.; Zhang, Jun

doi:10.2139/ssrn.1850885

Cited by 9 publications

(24 citation statements)

References 33 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…With our analysis with responsive pricing, the results in Li et al. () can be replicated with a general demand function and payment scheme.…”

Section: Introductionmentioning

confidence: 66%

“…Li et al. () consider a firm's supply diversification problem in the presence of random supply capacity with responsive pricing. They demonstrate that the cost‐first‐reliability‐second insight continues to hold with two correlated unreliable suppliers, but the insight no longer holds with more than two suppliers.…”

Section: Literature Reviewmentioning

confidence: 99%

“…However, the demand function and payment scheme are more general than the ones in Li et al. () and Li et al. ().…”

Section: Literature Reviewmentioning

confidence: 99%

See 2 more Smart Citations

Mitigating Supply Uncertainty: The Interplay Between Diversification and Pricing

Sethi

Zhang

2017

Production and Operations Management

Self Cite

View full text Add to dashboard Cite

We consider a firm's sourcing problem from one reliable supplier and one unreliable supplier in two price‐setting scenarios. In the committed pricing scenario, the firm makes the pricing decision before the supply uncertainty is resolved. In the responsive pricing scenario, the firm's pricing decision is made after the supply uncertainty is resolved. For the committed pricing scenario, we develop a condition on supply uncertainty that guarantees the unimodality of the firm's objective function. By comparing the firm's optimal diversification decisions in the two pricing scenarios, we examine the interplay of supply diversification strategy and responsive pricing strategy in mitigating supply uncertainty. While both strategies are effective in mitigating supply uncertainty, we show that they are not necessarily substitutes. The relationship between these two strategies depends on two adverse effects caused by supply uncertainty: the lost‐revenue effect and the lost‐goodwill effect. More specifically, when the lost‐revenue effect dominates the lost‐goodwill effect, these two strategies are complements; otherwise, they are substitutes. Furthermore, we examine the impact of market size, price sensitivity, supplier reliability, and failure rebate on the interplay between these two strategies, and discuss the implications of our results. Finally, we extend our analysis to the case of two unreliable suppliers and show that the insights regarding the interplay between diversification and pricing continue to hold.

show abstract

“…With our analysis with responsive pricing, the results in Li et al. () can be replicated with a general demand function and payment scheme.…”

Section: Introductionmentioning

confidence: 66%

Section: Literature Reviewmentioning

confidence: 99%

See 1 more Smart Citation

Mitigating Supply Uncertainty: The Interplay Between Diversification and Pricing

Sethi

Zhang

2017

Production and Operations Management

Self Cite

View full text Add to dashboard Cite

show abstract

“…(), and Li et al. (). While these papers study the diversification strategy over identical supply sources in terms of lead time, our work examines diversification strategy over multiple suppliers with different lead times.…”

Section: Literature Reviewmentioning

confidence: 98%

Offshore versus Onshore Sourcing: Quick Response, Random Yield, and Competition

Jung

2020

Production and Operations Management

View full text Add to dashboard Cite

Motivated by the recent reshoring initiatives, we study firms’ global sourcing strategies from two different supply sources, offshore and onshore supply bases, under supply and demand uncertainty. Interestingly, even though onshore sourcing has a significant benefit from market responsiveness, offshore sourcing having no cost advantage also provides benefits in the presence of yield uncertainty and market competition. If competing firms commit single sourcing, one firm may choose inferior offshore sourcing to dampen competition. When a dual‐sourcing option is available, firms always utilize dual sourcing, offshore sourcing as well as onshore sourcing, for risk pooling purpose. Our result shows that risk pooling is an essential driver in supplier selection in that the need for dual sourcing cannot be eliminated by other influential factors (e.g., responsiveness and competition effect). However, we find that firms may suffer from a dual‐sourcing option under competition. This contrasts with the conventional wisdom that dual sourcing benefits firms in the presence of supply uncertainty. When it comes to order allocation, market responsiveness is not necessarily an order winner since it does not lead to a larger order to an onshore supplier if demand is guaranteed above a certain level. Under competition, firms’ order allocation is mainly determined by supply yield correlations.

show abstract

“…Tao Li etc. [21] show sourcing and pricing decisions of a firm with correlated suppliers and a price-dependent demand. Therefore, under stochastic demand, to combine uncertain supply and pricing postponement in the supply chain system in the wholesale price contract model is the significant difference and the main innovation of this paper.…”

Section: Literature Reviewmentioning

confidence: 99%

Price Postponement in a Decentralized Newsvendor Model under Uncertain Supply and Demand

Zhang¹,

Xu²

2017

dtssehs

View full text Add to dashboard Cite

Abstract. With the rise of global procurement, economic globalization, on the one hand, promotes the development of supply chain; on the other hand it also increases the risk of supply chain, which makes the supply increasingly uncertain. According to the newsvendor model, we analyze the effect of price postponement in a decentralized newsvendor model with additive and price-dependent demand, wherein the supplier sets the wholesale price, and the retailer determines the order quantity and retail price. Such postponement strategies can be used by the retailer by delaying his retail price until after supply and demand uncertainties are observed. This research demonstrates the existence and uniqueness of the optimal order quantity of the retailer. We further shows that retailer adopts the price postponement strategy can reduce market uncertainty risk for retailers under the price dependent stochastic demand and uncertain supply by numerical simulation. At the same time, with the increase of the supplier's production cost, the selling price (or expected price) will increase, order quantity will decrease, and the expected profit of the supplier and retailer will decrease under pricing postponement model.

show abstract

Supply Diversification with Responsive Pricing

Cited by 9 publications

References 33 publications

Mitigating Supply Uncertainty: The Interplay Between Diversification and Pricing

Mitigating Supply Uncertainty: The Interplay Between Diversification and Pricing

Offshore versus Onshore Sourcing: Quick Response, Random Yield, and Competition

Price Postponement in a Decentralized Newsvendor Model under Uncertain Supply and Demand

Contact Info

Product

Resources

About