Gerard J. Burke

Single versus multiple supplier sourcing strategies

Successful supply chain management necessitates an effective sourcing strategy to combat uncertainties in both supply and demand. In particular, supply disruption results in excessive downtime of production resources, upstream and downstream supply chain repercussions, and eventually a loss in the market value of the firm. In this paper we analyze single period, single product sourcing decisions under demand uncertainty. Our approach integrates product prices, supplier costs, supplier capacities, historical supplier reliabilities and firm specific inventory costs. A unique feature of our approach is the integration of a firm specific supplier diversification function. We also extend our analysis to examine the impact of minimum supplier order quantities. Our results indicate that single sourcing is a dominant strategy only when supplier capacities are large relative to the product demand and when the firm does not obtain diversification benefits. In other cases, we find that multiple sourcing is an optimal sourcing strategy. We also characterize a non-intuitive trade-off between supplier minimum order quantities, costs, and supplier reliabilities. Finally, we examine the robustness of our results through an extensive numerical analysis of the key parameters of our model.

Heuristics for sourcing from multiple suppliers with alternative quantity discounts

In this paper, we analyze the impact of supplier pricing schemes and supplier capacity limitations on the optimal sourcing policy for a single firm. We consider the situation where the total quantity to be procured for a single period is known by the firm and communicated to the supplier set. In response to this communication, each supplier quotes a price and a capacity limit in terms of a maximum quantity that can be supplied to the buyer. Based on this information, the buyer makes a quantity allocation decision among the suppliers and corresponding to this decision is the choice of a subset of suppliers who will receive an order. Based on industry observations, a variety of supplier pricing schemes from the constituent group of suppliers are analyzed, including linear discounts, incremental units discounts, and all units discounts. Given the complexity of the optimization problem for certain types of pricing schemes, heuristic solution methodologies are developed to identify a quantity allocation decision for the firm. Through an extensive computational comparison, we find that these heuristics generate near-optimal solutions very quickly. Data from a major office products retailer is used to illustrate the resulting sourcing strategies given different pricing schemes and capacity limitations of suppliers in this industry. We find for the case of capacity constrained suppliers, the optimal quantity allocations for two complex pricing schemes (linear discount, and incremental units discount) are such that at most one selected supplier will receive an order quantity that is less than its capacity.

Analysis of compound bullwhip effect causes

This research investigates compound causes of the bullwhip effect (BWE) by considering an inventory system with multiple price-sensitive demand streams. Joint price and demand dynamics are captured by a vector time-series process that incorporates the stochastic co-movements in price and demand. We study two BWE measures, one for each demand stream individually and one for the aggregated demand. We show that demand parameters including demand autocorrelation, cross-correlation, and price sensitivity serve as root causes of the BWE. We prove that the impact of these parameters on the BWE can be additively decomposed. Conditions are established under which a pair of simultaneous compound causes may attenuate or dampen the BWE. When demand streams are aggregated, we derive a pooling factor that quantifies the impact of demand aggregation on order stability. When positive, the pooling factor corresponds to a synergy effect that captures the gain in the stability of the pooled orders. Conditions for the existence of the synergy effect are obtained for several special cases involving a zero leadtime. We also discuss how our analytical findings can be managerially applied to bullwhip mitigation strategies.

Allocating procurement to capacitated suppliers with concave quantity discounts

We consider a procurement problem where suppliers offer concave quantity discounts. The resulting continuous knapsack problem involves the minimization of a sum of separable concave functions. We identify polynomially solvable special cases of this NP-hard problem, and provide a fully polynomial-time approximation scheme for the general problem.

Measuring the effect of supply chain collaborations and market turbulence on performance outcomes

Collaboration is increasingly being viewed in the industry as a key to fostering performance and growth especially as the supply chains are becoming complex due to globalization. This research study discusses collaboration as an important supply chain strategy, and provides a framework for performance evaluation of the firm employing collaboration with its supply chain partners. Drawing on the relational view as the basis of collaboration, a COLLABORATION-TURBULENCE conceptual framework is suggested, and hypotheses are developed from the extant literature and tested using sample data collected from firms in India and United States. It was found that the level of supply chain collaboration between supply chain partners has a positive influence on the operational and relational outcomes which leads to a positive influence on the firm performance. In addition, based on behavioral and contingency theories, it was found that market turbulence moderates these relationships, having a positive influence on collaboration-operational outcomes link and a negative influence on collaboration-relational outcomes link. Managers who are confident about the level of collaboration in their supply chain can use this to decide whether to emphasize on operational or relational outcomes in times of market turbulence which will be critical to ensuring success of the firm.

Supplier Innovation Strategy and Performance: A Matter of Supply Chain Market Positioning

Extant research consistently illustrates the positive benefits customers get from having more innovative suppliers. However, do suppliers benefit financially from positioning themselves as leading innovators? Utilizing a secondary dataset of 1039 supplier to customer base observations, and grounding our study in the structure-conduct-performance framework, we examine the extent to which suppliers are able to benefit from pursuing a more leading or lagging innovation strategy within their industry. While in general we find that suppliers employing a leading innovator strategy have higher levels of financial performance, such an effect is not universal. Rather, the ability of the supplying firm to leverage their innovation strategy into increased performance is highly contingent upon not only the innovation levels of their own industry, but also the innovation levels of the industries which they supply. Our results, therefore, suggest that it would be advantageous for suppliers to take a supply chain perspective and strategically incorporate the innovation characteristics of their customers when determining whether to pursue a leading or lagging innovation strategy.

A cost-based model for customer batching in mass service operations

Customers of mass services have similar needs. Therefore, operations managers have options to process customers in batches, rather than individually. While batching in manufacturing may reduce setup time, batching in services may reduce both setup and processing time. Although substantial prior research has been done on batch sizes in the manufacturing context, significant differences in cost structures complicate direct application of these models to services. Of special concern for polices regarding batching in service operations are immediate temporal effects on and preferences of customers. This paper synthesizes and extends previous research to develop and analyze an economic model for determining optimal batch sizes for many mass service scenarios.

“Do as I Do and Not as I Say”: Exploring Price‐Oriented Maverick Buying During Supplier Selection

This article empirically examines the occurrence of price-oriented maverick buying (MB) during supplier selection, in a direct purchasing process context. Drawing on agency theory, maverick buying, and total cost of ownership (TCO) literature, the statistically significant existence of price-oriented MB is investigated and the purchasing manager (PM)-related factors that influence such noncompliant behavior are determined. A discrete choice experiment is designed to simulate a TCO-based supplier selection process in which an established purchasing framework agreement stipulates PMs not necessarily be price-oriented (i.e., select suppliers primarily based on lowest price), and then models PM choice behavior in the supplier selection process (SSP), utilizing a conditional logit model (CLM) to determine PM compliance to the established purchasing framework agreement and identify if price-oriented MB exists. Statistical tests utilizing comprehensive primary and secondary data are then conducted to determine if correlational relationships exist between PM-related factors and PM price-orientation. Results indicate that three PM-related factors bear a significant correlational relationship to PM price-orientation.