Analysis of global brands’ green procurement strategy: Co-opetitive local sourcing vs. overseas sourcing under delivery disruption

Abstract

Recently, black swan events, such as the Covid-19 pandemic and the Russia-Ukraine war, have caused disruptions for the local brand with overseas procurement (BOP) who traditionally purchase remanufactured components globally. This induces the BOP to find a local alternative supplier, although the remanufactured components without supply disruption can be of high price, and the local supplier has a self-branded business. In this paper, we consider a BOP's strategic sourcing decisions from a local supplier with self-branded end products (LSP) who sells remanufactured components. We focus on the BOP's incentives toward such a “co-opetitive” relationship and the LSP's willingness to sell remanufactured components to the BOP. We find that having two suppliers may induce a component price war but the component price will not become too low when the probability of overseas supply disruption is high. Interestingly, we find that the BOP will allocate a low proportion of component purchasing orders to the LSP when it faces a high probability of overseas supply disruption. In contrast, the LSP has the incentive to sell remanufactured components to the BOP when the probability of overseas supply disruption is in a moderate range. If the BOP's remanufactured component quality requirement is high, or the probability of overseas supply disruption is low, the LSP might even have a profit loss when selling components to the BOP.