Determining number of suppliers, duration of supply cycle and allocation to in-house production under supply uncertainty

Abstract

Supply chain management has become an increasingly critical strategic capability to gain competitive advantage in the global business environment. The COVID-19 pandemic, coupled with geopolitical conflicts, has caused unprecedented disruptions to global supply chains. Suggested strategies to cope with the uncertain supply environment include better supplier selection, review of the number of demand periods in the supply cycle and the possibility of in-house production. This research proposes a novel approach that considers the aforementioned strategies by considering that both the suppliers and the manufacturer have the capability to increase supply and production, respectively. The proposed model is applicable in manufacturing environments characterized by mature products and a well-consolidated pool of preferred suppliers. The effectiveness of the proposed model is evaluated through a set of experiments, revealing significant trade-offs among decision variables and model parameters. These trade-offs provide valuable managerial insights, such as the optimal percent allocation of in-house manufacturing increasing when both supplier and in-house manufacturing flexibility increase up to a certain point, but then decreasing. Overall, this research presents a valuable contribution to supply chain management literature, highlighting important insights that can inform decision-making in complex manufacturing environments.