Amy Z. Zeng

Developing a framework for evaluating the logistics costs in global sourcing processes

Global sourcing is becoming a prerequisite for companies competing in todays market. The logistics costs often comprise a large portion of the total global sourcing cost, thereby determining the effectiveness of this procurement strategy. However, evaluating the logistics cost in a global context is frequently difficult. This paper presents a five‐step evaluation framework and illustrates how this framework can be implemented using a case study at a leading firm in the US aviation industry and its part supplier in Chengdu, China. The framework not only identifies the key logistics cost items, but also suggests a way of quantifying each of the cost elements. The computational part of the framework can be easily implemented on spreadsheets and offers substantial flexibility to accommodate assessment of various transportation alternatives and sensitivity analysis.

Single versus multiple sourcing in the presence of risks

This paper relies on a decision-tree approach to aid a buying firm in determining the optimal size of its supply base in the presence of risks. The risk under consideration refers to any unpredictable operations interruptions caused by all suppliers being unavailable to satisfy the buying firms demand. The relationship between the levels of risk and associated trade-offs is captured by a decision-tree model, from which the expected cost function is formulated. The exact or approximate optimal solutions for various scenarios, as well as their sensitivity, are obtained and examined.

A synthetic study of sourcing strategies

As more evidence indicates that a corporation is very much defined by its purchases and benefited by its close partnership with the suppliers, the sourcing decision becomes increasingly important in the firm’s growth and profit. This paper synthesizes the available sourcing alternatives into four categories, namely multiple sourcing, single sourcing, single/dual hybrid or network sourcing, and global sourcing, and provides a comprehensive review of these purchasing methods based on extensive literature. Besides the discussion of the pros and cons, the paper focuses on the underlying factors that determine the preference and suitability of each sourcing option. In addition, with the note that numerous companies are switching to do business on a global basis, we attempt to use China as an example to examine global sourcing from the standpoints of both buyer and supplier.

Global sourcing: process and design for efficient management

Although the literature on the strategic aspect of global sourcing is large, detailed studies on this procurement strategy from a process perspective are limited. This paper adopts the process viewpoint and examines the design and management issues associated with the global sourcing process based on a case study at a leading firm in the US aviation industry. The effectiveness of the company’s global sourcing process is evaluated, the design alternatives of the supply chain structure are compared, and the critical issues of efficient management of the process are summarized. Specifically, three logistics‐based criteria are developed to indicate the effectiveness of the transportation and distribution network. The paper also demonstrates that the process design can be assessed based on the dimensions of supply chain integration. Finally, a flow‐level matrix is developed to identify the critical issues of managing the global sourcing process.

Achieving information integration in supply chain management through B2B e‐hubs: concepts and analyses

While supply chain integration is measured at three levels: information, resources and organization, the emphasis of the paper is placed on how information integration can be achieved through B2B e‐hubs. After reviewing the concept of supply chain integration and the evolution of e‐hubs, we examine two groups of e‐hubs classified by supply chain processes, namely procurement and transportation, along with two case studies of each. A value‐gap analysis is performed from the perspectives of facilitating supply chain activities and connecting chain partners, revealing that gaps and limitations do exist in existing e‐hubs. Finally, we present a framework for integrating existing e‐hubs into other advanced information technologies, such as ERP and CRM, to bridge the gaps and to expand their functionality to provide better solutions to supply chain integration.

Achieving better coordination through revenue sharing and bargaining in a two-stage supply chain

Coordination is essential for improving supply-chain wide performance. In this paper, we focus on a two-stage supply chain consisting of one supplier and one retailer, between which the transaction quantity is sensitive to the inventory level offered by the supplier. The coordination between the two parties is achieved through revenue sharing and bargaining so that their respective profit is better than that resulted from a decentralized optimization. The two key parameters, namely the suppliers inventory quantity and the range of the revenue-sharing fraction are obtained, and numerical examples of the contracts for various scenarios are also given.

Analyzing the evolutionary stability of the vendor-managed inventory supply chains

One of the widely used strategies for achieving system integration in the arena of supply chain management is the vendor-managed inventory (VMI) approach. Although there exists a large amount of literature that examines various aspects of VMI, little looks at how this model evolves as the implementation progresses and matures. Therefore, this paper shows how to analyze the intrinsic evolutionary mechanism of the VMI supply chains by applying the evolutionary game theories. It is found that during the early stage of the VMI implementation, the upstream supplier will have some profit loss; however, as the transaction quantity increases in the long run, which will eventually benefit the entire chain, it is necessary for the downstream buyer to share profit with the upstream supplier to cover the suppliers initial loss in order to exploit and sustain the benefits of the VMI. Additionally, the impact factors for VMI to become an evolutionary stable strategy are examined. All the results identify the conditions under which the VMI model is favorable over the traditional chain structure and shed lights on when and why collaboration is critical for a successful, long-term implementation of VMI.

Applying the analytic hierarchy process to the offshore outsourcing location decision

Purpose – The purpose of this paper is to show that there is a wealth of academic literature that qualitatively examines the outsourcing and offshoring from a go/no go perspective. The paper examines the complex “where to outsource” question by applying a quantitative approach called Analytic Hierarchy Process (AHP).Design/methodology/approach – The authors examine a Fortune 500 companys real‐world decision about where to outsource and summarize the current selection process employed by the company. We then apply our AHP model to the companys decision and compare the results.Findings – There are four major findings: the location selection decision is a component of the outsource supplier selection decision; the AHP model effectively manages the complexity of the decision making process, incorporating all decision criteria harmoniously; a method such as AHP, which is able to incorporate both qualitative and quantitative criteria into evaluations, would streamline the decision‐making process; and the AHP ...

Supplier selection model with contingency planning for supplier failures

We consider the optimal allocation of demand across a set of suppliers given the risk of supplier failures. We assume items sourced are used in multiple facilities and can be purchased from multiple suppliers with different cost and reliability characteristics. Suppliers have production flexibility that allows them to deliver a contingency quantity in case other suppliers fail. Costs considered include supplier fixed costs and variable costs per unit, while failure to deliver to a demand point results in a particular financial loss. The model utilizes the decision tree approach to consider all the possible states of nature when one or more suppliers fail, as well as expand the traditional transportation problem. Unlike other supplier selection models, this model considers contingency planning in the decision process, minimizing the total network costs. This results in a base allocation to one or more of the available suppliers and a state of nature specific delivery contingency plan from the suppliers to each demand point. A numerical example, as well as sensitivity analysis, is presented to illustrate the model and provide insights.

Using lean principles to streamline the quotation process: a case study

The quotation process tightly links the manufacturer and its suppliers and customers on a supply chain. An excellent record of successful quotes not only benefits trading partners, but also positions the manufacturer on the market in terms of its responsiveness, customer service, efficiency, and competitive pricing. In the existing literature, lean principles are generally applied to manufacturing only, this paper relies on a case study to show the application of lean manufacturing principles to the administrative function of the quotation process. In addition, the case demonstrates that electronic solutions are the best remedies for streamlining the quotation process to reduce the total cycle time – the basis for providing competitive prices and excellent customer service.