The Importance of Decoupling Recurrent and Disruption Risks in a Supply Chain
نویسندگان
چکیده
This paper focuses on the importance of decoupling recurrent supply risk and disruption risk when planning appropriate mitigation strategies. We show that bundling the two uncertainties leads a manager to underutilize a reliable source while over utilizing a cheaper but less reliable supplier. As in Dada, Petruzzi and Schwarz [6], we show that increasing quantity from a cheaper but less reliable source is an effective risk mitigation strategy if most of the supply risk growth comes from an increase in recurrent uncertainty. In contrast, we show that a firm should order more from a reliable source and less from a cheaper but less reliable source if most of the supply risk growth comes from an increase in disruption probability.
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