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A Solution for Sourcing Decisions under Supply Capacity Risk
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 Title & Authors
A Solution for Sourcing Decisions under Supply Capacity Risk
Jang, Won-Jun; Park, Yang-Byung;
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This paper proposes a mathematical model-based solution for sourcing decisions with an objective of minimizing the manufacturer`s total cost in the two-echelon supply chain with supply capacity risk. The risk impact is represented by uniform, beta, and triangular distributions. For the mathematical model, the probability vector of normal, risk, and recovery statuses are developed by using the status transition probability matrix and the equations for estimating the supply capacity under risk and recovery statuses are derived for each of the three probability distributions. Those formulas derived are validated using the sampling method. The results of the simulation study on the test problem show that the sourcing decisions using the proposed solution reduce the total cost by 1.6~3.7%, compared with the ones without a consideration of supply capacity risk. The total cost reduction increases approximately in a linear fashion as the probability of risk occurrence or reduction rate of supply capacity due to risk events is increased.
Sourcing Problems;Supply Capacity Risk;Supply Chain Risk Management;Logistics;
 Cited by
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