Sourcing Decisions Research Articles

Managing supply chain risks with dual sourcing: Bayesian learning of censored supply capacity

Dual sourcing is a common strategy for mitigating supply chain risks, with supply capacity uncertainty being one of the most significant risks. However, firms often have limited knowledge about uncertain supply capacity, and can only observe it when the delivered quantity is less than the ordered amount. This leads to censored supply capacity observations. To investigate how supply capacity learning affects dual-sourcing decisions, we propose a model of a firm sourcing non-storable substitute products from an expensive reliable supplier and an inexpensive unreliable supplier to meet a deterministic time-varying demand over a finite horizon. The unreliable supplier has a random capacity with an unknown parameter. The firm updates its belief about this parameter using Bayesian learning and adapts its sourcing decisions to balance the tradeoff between maximizing current profits based on its current belief (exploitation) and increasing the precision of its belief for future periods (exploration). We use Bayesian dynamic programming to determine the firm’s myopic sourcing policy and partially characterize its optimal sourcing policy. We apply a state space reduction technique to Weibull distributed capacity, resulting in an inductively solvable optimization problem. The optimal sourcing policy can be obtained under a condition that ensures splitting the demand between the suppliers is optimal. For exponentially distributed capacity, the optimization problem has a recursive closed-form solution, and the optimal sourcing policy is such that the optimal order quantity from the reliable (unreliable) supplier is smaller (greater) than the myopic quantity. We complement our analytical results with numerical examples and discuss extensions to random demand and inventory carryover.

An experimental investigation of attribute framing effects on risky sourcing behaviour: the mediating role of attention allocated to suppliers' quality information

PurposeDespite its significance, research on how attribute framing affects ordering decisions in dual sourcing remains insufficient. Hence, this study investigated the effects of attribute framing in a sourcing task involving certain and uncertain qualities of two suppliers and analysed the role of attention with respect to suppliers' information in framing effects.Design/methodology/approachThe impacts of attribute framing on sourcing decisions were demonstrated in two online between-subject (2 × 2 factorial) experimental studies involving professional samples. Study 2 was an eye-tracking experiment.FindingsIn Study 1 (N = 251), participants presented with a “high-quality” rather than a “low-quality” frame made different sourcing decisions, opting for larger percentage of order(s) from a supplier under the “high-quality” frame. This pattern holds true for suppliers who differ in risk. This finding was replicated in Study 2 (N = 129). Attention asymmetry related to the information on supplier quality contributes to this effect. Attention directed towards information regarding the supplier's quality under a positive frame mediated the relationship between attribute framing and sourcing decisions.Practical implicationsHighlighting the positive attributes of a risky supplier is essential when ordering from the risky supplier is an optimal decision. It is advantageous for suppliers to highlight positive rather than negative attributes when describing the quality of their components against others.Originality/valueThis is the first study to examine the effect of attention on the relationship between attribute framing and dual sourcing. This presents a new behavioural perspective wherein managers' attention to information plays a vital role.

White-glove service delivery: A quantitative analysis

White-Glove Service (WGS) is an emerging business model of last-mile service delivery with the intersection of omnichannel retailing, demand-driven supply chain, and the shared economic activity of crowdsourcing by a multiskilled workforce. Last-mile delivery (LMD) is the last leg of a journey comprising the movement of goods from a transportation hub to a final destination. Today’s customers expect convenience, speed, consistency, great mobile experience, and assistance from knowledgeable, competent company employees. WGS is a recent business buzzword characterizing the response to such expectations. To provide a WGS of LMD to customers, many factors should be considered. LMD services often require multiple-expertise and flexible workforce to deliver the diverse and customized needs of the customers. The extant literature shows that academic researchers have only considered limited aspects of WGS delivery. In this paper, we present two comprehensive analytical models based on mixed integer program for WGS delivery. We show that the problems are NP-hard in the strong sense. By means of extensive computational experiment, we investigate the trade-offs of two different sourcing decisions with differing business scenarios for the large-scale problems in terms of multiskilled worker availability and last-minute changes in a customer’s preference.

Guest editorial: Impact of COVID-19 on strategic sourcing decisions and business performance

Guest editorial: Impact of COVID-19 on strategic sourcing decisions and business performance

Improving supplier performance and strategic sourcing decisions by integrating jobshop scheduling, inventory management and agile new product development

PurposeThe purpose of this study is to improve supplier performance and strategic sourcing decisions by integrating jobshop scheduling, inventory management and agile new product development. During the COVID-19 pandemic, the organizations have struggled a lot to maintain the supplier performance and strategic sourcing decisions in the organizational benefit. However, in this context, the organization’s agile new product development (ANPD) process must be aligned with this requirement by maintaining the inventory and jobshop scheduling. As a result, identifying ANPD indicators, performance metrics and developing a structural framework to guide practitioners at various stages for smooth adoption is essential to improve the overall performance.Design/methodology/approachA comprehensive literature review is conducted to identify jobshop scheduling, inventory management and ANPD indicators along with the performance metrics, and the hierarchical structure is developed with the help of expert opinion. The modified stepwise weight assessment ratio analysis (SWARA) and weighted aggregated sum product assurance (WASPAS) techniques, along with expert judgement, are used in this study to calculate the weights of the indicators and the ranking of the performance metrics.FindingsAs per the weight computation by SWARA method, the strategy indicators have the highest relative weight, followed by the product design indicators, management indicators, technical indicators, supply chain indicators and organization culture indicators. According to the ranking of performance metrics obtained through WASPAS, the “frequency of new product development is at the top”, followed by “advances in product design and development” and “estimated versus actual time to market”.Research limitations/implicationsIt is believed that the framework developed will help industrial practitioners to plan effectively to improve supplier performance. The indicators identified may guide the ANPD penetration, and performance metrics may be useful for evaluation and comparison.Practical implicationsThe outcomes of the present study will be extremely beneficial for the industry practitioners to improve the supplier performance. The indicators identified may guide the ANPD penetration, and performance metrics may be useful for evaluation and comparison.Originality/valueA unique combination of modified SWARA–WASPAS technique has been used in this study which would be beneficial for organizations willing to adopt the jobshop scheduling and inventory management and ANPD for improving supply chain performance.

Variation in Seed Dormancy of Chaco Seasonally Dry Forest Species: Effects of Seed Traits and Population Environmental Conditions.

The persistence of subtropical seasonally dry forests urgently requires the implementation of ex situ conservation and restoration programs. We studied variation in seed traits and dormancy of six native species growing in seasonally dry Chaco forests of Argentina. We documented high intra- and interspecific variability in seed traits and dormancy. Fresh seeds of Geoffroea decorticans and Parasenegalia visco (Fabaceae) were water-permeable and nondormant (ND), while those of Parkinsonia praecox and Vachellia aroma (Fabaceae) were water-impermeable and had physical dormancy (PY). Seeds of Schnopsis lorentzii (Anacardiaceae) and Sarcomphalus mistol (Rhamnaceae) were water-permeable and had physiological dormancy (PD). Mechanical and chemical scarification were the most effective methods to break PY, and dry storage for 3 months was effective in breaking PD. Seeds of large-seeded species were ND or had PD, and those of small-seeded species had PY. Species inhabiting moist habitats had ND seeds, whereas those from seasonally dry habitats had seeds with PY or PD. These results suggest that seed traits and dormancy are species-specific and that intraspecific variation in seed traits is likely associated with high phenotypic plasticity of species in response to local environmental heterogeneity. These findings should be considered at the time of implementation of conservation techniques and for seed sourcing decisions for restoration.

Evaluation of Sourcing Decision for Hydrogen Supply Chain Using an Integrated Multi-Criteria Decision Analysis (MCDA) Tool

The use of fossil fuels has caused many environmental issues, including greenhouse gas emissions and associated climate change. Several studies have focused on mitigating this problem. One dynamic direction for emerging sources of future renewable energy is the use of hydrogen energy. In this research, we evaluate the sourcing decision for a hydrogen supply chain in the context of a case study in Thailand using group decision making analysis for policy implications. We use an integrative multi-criteria decision analysis (MCDA) tool which includes an analytic hierarchy process (AHP), fuzzy AHP (FAHP), and data envelopment analysis (DEA) to analyze weighted criteria and sourcing alternatives using data collected from a group of selected experts. A list of criteria related to sustainability paradigms and sourcing decisions for possible use of hydrogen energy, including natural gas, coal, biomass, and water, are evaluated. Our results reveal that political acceptance is considered the most important criterion with a global weight of 0.514 in the context of Thailand. Additionally, natural gas is found to be the foreseeable source for hydrogen production in Thailand with a global weight of 0.313. We also note that the analysis is based on specific data inputs and that an alternative with a lower score does not imply that the source is not worth exploring.

Supply diversification under random yield: The impact of price postponement

Supply diversification and pricing are two common mechanisms for dealing with supply yield uncertainty. This paper characterizes a firm's pricing and sourcing decisions under supply yield uncertainty, and studies the interplay between the two mechanisms. We compare the optimal sourcing decisions under two distinct pricing schemes: (1) ex ante pricing—the firm simultaneously makes the sales price and sourcing decisions before production takes place; (2) responsive pricing—the pricing decision is postponed until after the production yield realization. Although the firm is better off with responsive pricing, the effect of price postponement on the optimal sourcing decision and the firm's need for supply diversification varies and is influenced by factors such as unit procurement cost, supply portfolio, and supply reliability. For the case of one unreliable supplier, we show that responsive pricing mitigates the overage and underage risks imposed by yield uncertainty, and results in a lower optimal order quantity than that under ex ante pricing when the procurement cost is low, and a higher quantity otherwise. For the case of two unreliable suppliers, we show that responsive pricing promotes supply diversification when the sole‐sourced supplier's reliability is low, and discourages when it is high. By contrast, when the sole‐sourced supplier's reliability is moderate, responsive pricing promotes supply diversification when its unit procurement cost is low and discourages otherwise. The composition of supply portfolio also has a fundamental impact on such strategic interplay: When the supply portfolio consists of one unreliable and one reliable supplier, diversified sourcing is never optimal under ex ante pricing, but may be optimal under responsive pricing. Thus, responsive pricing promotes dual sourcing in this setting. We also conduct comprehensive numerical experiments to both confirm the robustness of the main results and derive additional insights.

Where should they come from? Where should they go? Several measures of seed source locality fail to predict plant establishment in early prairie restorations

AbstractDuring the “decade on restoration,” we must understand how to reliably re‐establish native plant populations. When establishing populations through seed addition, practitioners often prioritize obtaining seed from locations geographically near the restoration site (i.e. “local seed sourcing”). They are assumed to be under similar environmental conditions to the restoration site and should establish more robust plant populations and preserve local biotic interactions better than seeds sourced from further away. However, this assumption remains virtually untested in realistic restoration settings and the importance of seed sourcing, relative to other factors such as seeding rate and management regimes, is unclear.To determine if seed sourcing decision impacts plant establishment, abundance and phenology, we developed a partnership between university‐researchers and a native seed producer that kept records on where their seed was sourced from and where it was planted. At each site, we recorded the abundance and phenological stage of five commonly used tallgrass prairie restoration species seeded at 24 sites undergoing restoration across Michigan. We considered two measures of seed source locality: geographic distance (seeds were sourced from locations 6–750 km away from their respective restoration sites) and environmental distance. We also obtained data on the seeding rate and post‐seeding management at each site.We found that no measure of seed source locality predicted the likelihood of plant establishment or abundance at restoration sites. However, sites sown with seed from further away, or from cooler and wetter climates, had a greater proportion of flowering individuals earlier in the season. Finally, sites with higher seeding rates had greater plant abundance, and post‐seeding management of the restoration site increased the likelihood a species would establish by 36%.Overall, these results support that seed sourcing decisions did not impact plant establishment or abundance in our system. However, using less‐local seed sources may alter flowering phenology.Our results suggest that tallgrass prairie restoration efforts should prioritize higher seeding rates, post‐seeding management, and might expand the region seed sources are considered “local”, though this may impact flowering phenology. Future research leveraging native seed producer records can help answer critical questions about restoration seed sourcing.

Optimal sourcing decisions considering quantity constraints under rank-dependent utility theory

To improve profits, retailers can order products from two suppliers: one cheap supplier with a long lead time and one quick-response supplier with a high cost. Business practices and empirical investigations have shown that retailers’ actual ordering decisions often deviate from expected utility due to behavioural factors. This paper investigates a sourcing problem for a retailer from two manufacturers with different lead times and costs under quantity constraints considering rank-dependent utility theory (RDEU). RDEU involves behavioural factors, including loss aversion, reference profit and weighting of probabilities. For this problem, we build a two-stage ordering model and derive the optimal ordering decisions before and during the selling season by using convex optimisation methods. We characterise the optimal ordering decisions of the retailer under RDEU considering different quantity constraints. We compare the results with those under the expected utility theory (EUT). We analyse the effects of behavioural factors on the retailer’s ordering decisions. It is found that when the selling price is larger, a retailer will always order more from the manufacturers before the selling season under EUT but may order less under RDEU when facing demand uncertainty and quantity constraints during the selling season. Additionally, when the selling price is high, the loss-averse retailer should order more than the risk-neutral retailer to avoid inventory shortage. A higher degree of loss averseness will induce the retailer to delay placing orders to gain more demand information and reduce the possibility of stock out or overstock.

Robust Sourcing Under Multilevel Supply Risks: Analysis of Random Yield and Capacity

We consider the optimal sourcing problem when the available suppliers are subject to ambiguously correlated supply risks. This problem is motivated by the increasing severity of supply risks and difficulty evaluating common sources of vulnerability in upstream supply chains, which are problems reported by many surveys of goods-producing firms. We propose a distributionally robust model that accommodates (i) multiple levels of supply disruption, not just full delivery or no delivery, and (ii) can use data-driven estimates of the underlying correlation to develop sourcing strategies in situations where the true correlation structure is ambiguous. Using this framework, we provide analytical results regarding the form of a worst-case supply distribution and show that taking such a worst-case perspective is appealing due to severe consequences associated with supply chain risks. Moreover, we show how our distributionally robust model may be used to offer guidance to firms considering whether to exert additional effort in attempt to better understanding the prevailing correlation structure. Extensive computational experiments further demonstrate the performance of our distributionally robust approach and show how supplier characteristics and the type of supply uncertainty affect the optimal sourcing decision. History: Accepted by Pascal Van Hentenryck, Area Editor for Computational Modeling: Methods and Analysis. Funding: K. Pan was supported in part by the Research Grants Council of Hong Kong [Grant 15501920] and in part by the National Natural Science Foundation of China [Grant 72001185]. Supplemental Material: The software that supports the findings of this study is available within the paper and its Supplemental Information ( https://pubsonline.informs.org/doi/suppl/10.1287/ijoc.2022.1254 ) or is available from the IJOC GitHub software repository ( https://github.com/INFORMSJoC ) at http://dx.doi.org/10.5281/zenodo.7129356 .

Incentive conflict and supply contracts under carbon cap policy.

Environmental regulations, once promulgated, can cause incentive conflict between manufacturers and suppliers. A manufacturer facing the regulation may undertake choices that can affect his sourcing decisions with the supplier. To analyze this, we develop a game-theoretic model considering a manufacturer who faces a per-unit carbon emissions cap and sources from a supplier. The manufacturer operates in a carbon sensitive market. We analyze the responses of the manufacturer and supplier and show that since the burden of carbon emissions cap is borne by the manufacturer, the first-best outcomes are not reached. Therefore, the supplier may offer different contracts to incentivize the manufacturer. We study two mechanisms: the two-part tariff and the revenue-and-investment sharing contracts. We show how such contracts achieve coordination and deliver efficient supply chain outcomes. Interestingly, we find that the contract preferences of the manufacturer and the supplier may not be the same and vary under different market conditions. Summarily, we highlight important considerations for the supply chain players in designing suitable incentives.

Sourcing strategies of manufacturers with customer returns and product design efforts

AbstractWe develop game‐theoretic models to study the sourcing strategies of the two competing manufacturers who face customer returns due to product design mismatch. The manufacturers have opportunities to reduce the likelihood of customer returns by putting efforts into improving product design. Each manufacturer has the option to outsource product design and production to an upstream supplier or keep product design and production internally. We show that the sourcing decisions of the two manufacturers depend on the level of relative return from design investment (determined by the cost of design efforts, degree of horizontal product differentiation, and expected costs related to returns). We identify the sourcing strategy equilibrium and show that the higher cost of design effort and/or the higher degree of horizontal product differentiation expand, while the higher costs related to returns shrink, the range in which symmetric outsourcing is an equilibrium. Furthermore, as compared to symmetric insourcing, symmetric outsourcing not only softens the price competition but may also increase design effort levels, and thus both manufacturers are better off from outsourcing. However, symmetric outsourcing may hurt both consumer surplus and social welfare.

COVID-19 turbulence and positive shifts in online purchasing by consumers: modeling the enablers using ISM-MICMAC analysis

PurposeSuppliers and marketers have started planning toward postpandemic scenarios where logistics and retail will happen in a new way with the help of technological advances. This shift means new challenges for manufacturers, suppliers and retailers, and there is a need for strategic sourcing decisions for a robust supply chain system, logistics and on-time delivery system, as consumers have shown a positive change in online buying behavior. Furthermore, with digital transformation, customers are expected to not return to traditional buying. Hence, it becomes essential to identify the factors acting as enablers of online purchase behavior for sustainable digital business. This study aims to analyze the positive shifts in online purchasing by consumers, identify and model the enablers of positive transformations in online purchasing by consumers.Design/methodology/approachThe interpretative structural modeling (ISM) technique is used to draw the interrelationships among the variables and their impact on online buying. A context-oriented relationship among the factors has been set up through the expert opinion technique. A total of 40 specialists have been approached for this. ISM with Matrice d’impacts croisés multiplication appliquée á un classment (MICMAC) analysis was used to prioritize these drivers, identify the most critical factors and establish a driver-dependence relationship among these drivers.FindingsSeveral significant categories of enablers like health, trust, convenience, work from home, referral buying, panic purchase and overstocking possess a strong influence on the shift to online due to the pandemic. The results will help the policymakers, suppliers, retailers, managers and practitioners with insights to plan, prepare for challenges and make decisions toward preparation and shifting to the emergent digital world. In addition, the study provides academicians scope for further research in the related area.Research limitations/implicationsConsumer behavior significantly impacts retail and supply chain business, as it is an interface with the customer and links between a manufacturer and a customer. This study provides an insight into the shift in purchase behavior which can help suppliers in this transition phase to be better prepared for tomorrow to achieve sustainable competitive advantage.Originality/valueThis study assists practitioners and researchers in understanding the interrelationships among the factors using ISM-MICMAC analysis in a realistic way rather than daydreaming with overambitious goals.

Seed sourcing strategies for ecological restoration under climate change: A review of the current literature

Climate change continues to alter the seasonal timing and extremes of global temperature and precipitation patterns. These departures from historic conditions along with the predicted variability of future climates present a challenge to seed sourcing, or provenance strategy decisions, within the practice of ecological restoration. The “local is best” for seed sourcing paradigm is predicated upon the assumption that ecotypes are genetically adapted to their local environment. However, local adaptations are potentially being outpaced by climate change, and the ability of plant populations to naturally migrate or shift their distribution accordingly may be limited by habitat fragmentation. Restoration practitioners and natural area managers have a general understanding of the importance of matching the inherent adaptations of source populations with the current and/or future site conditions where those seeds or propagules are planted. However, for many species used in seed-based restoration, there is a lack of empirical evidence to guide seed sourcing decisions, which are critical for the longevity and ecological function of restored natural communities. With the goal of characterizing, synthesizing, and applying experimental research to guide restoration practice, we conducted a systematic review of the literature on provenance testing of taxa undertaken to inform seed sourcing strategies for climate resiliency. We found a strong bias in the choice of study organism: most studies have been conducted on tree species. We also found a strong bias regarding where this research has been conducted, with North America (52%) and Europe (31%) overrepresented. Experiments were designed to assess how propagule origin influences performance across both climatic (26%) and geographic (15%) distance, with some studies focused on determining how climate normal conditions (39%) impacted performance related to survivorship, growth and other parameters. We describe the patterns and gaps our review identified, highlight specific topics which require further research, and provide practical suggestions of immediate and longer-term tools that restoration practitioners can use to guide and build resilient natural communities under future climate scenarios.

Locally Sourced Seed is a Commonly Used but Widely Defined Practice for Grassland Restoration

Abstract With continued losses of grassland, the need for grassland restoration increases, and other contemporary threats, such as climate change, may require new techniques for restorations to be successful and resilient. The conservation community has promoted the use of locally sourced seed for grassland restorations, but it is unclear how widespread the practice has become. Furthermore, rethinking how seed is sourced for grassland restorations is one potential strategy to facilitate climate change adaptation. We surveyed practitioners (anyone conducting grassland restorations) across the United States and Canada in 2017 regarding organizational, state/local government, or individual policies for using locally sourced seed in grassland restorations, how local was defined, and whether climate change was considered in these policies and decisions. We received 494 responses from 40 U.S. states and 5 Canadian provinces. Policies and individual decisions supporting locally sourced seed were common, with only 3.6% of practitioners reporting no consideration of local seed sources in restorations. However, the definition of local varied widely, with relatively large geographic areas, such as ecoregions, considered as a local source. Some practitioners considered climate change, but it was not the greatest concern when making seed sourcing decisions. When they did consider climate change, practitioners' most reported strategy was expanding seed zones used for their seed mix. Although there was a heavy upper Midwest bias in the survey responses, the number and geographic scope of responses provides a snapshot of seed sourcing strategies used by practitioners. Our results suggest that practitioners are concerned about maintaining adaptation given the focus on local seed sources, and outreach could be useful to help practitioners incorporate climate adaptation strategies into seed sourcing practices.

The impact of tariffs and price premiums of locally manufactured products on global manufacturers' sourcing strategies

The past decade has seen significant pressure to return manufacturing to developed countries. Such movements call for import tariffs to be raised and consumers' valuation of products made from locally sourced components increased. These factors are believed to stimulate firms operating in a single market to source components locally. However, it is not clear that they are equally effective for multinational firms that produce and sell products in multiple markets. To enrich the understanding of this issue, we build a game‐theoretical model to analyze the sourcing decisions of a global manufacturer that maintains production sites and sells products in both domestic and foreign markets in a competitive environment. The firm can choose either to source components from suppliers located in the same markets as the manufacturing sites to gain tariff savings and a price premium from consumers' higher valuation, or to source all components from a single foreign supplier to obtain a lower sourcing cost. We find that the structure of the global supply chain plays a critical role in the firm's sourcing strategy. Consumers' higher valuation of locally manufactured goods always promotes local sourcing. Raising tariffs, however, might backfire and discourage local sourcing because of the firm's global supply chain structure and the foreign supplier's strategic response to higher tariffs. Finally, local sourcing may reduce the consumer surplus even though consumers place a higher value on locally manufactured goods. This paper sheds light on recent movements to return manufacturing to developed countries and demonstrates the importance of taking the manufacturer's global supply chain structure and vertical interaction with suppliers into account.

A supply chain sourcing model at the interface of operations and sustainability

In this article, we develop a supply chain sourcing model that incorporates both sustainability and operational performance measures. The model selects suppliers and determines sustainability investments and order allocations among the selected suppliers. High sustainability performance, as well as cost efficiency, is achieved while a high operational performance level is maintained. We formulate the problem as a nonlinear bi-objective integer-programming model, discover the model’s special features, and propose an effective and computationally efficient algorithm to solve it. To quantify a supply chain’s sustainability performance, we adopt the Environmental, Social, and Governance index. Instead of searching for just one sourcing solution, we find the Pareto-optimal set of effective solutions. Numerical tests verify that our algorithm outperforms an existing sourcing algorithm in terms of computational efficiency. A simulation of Apple’s sourcing decisions demonstrates the effectiveness of the model in business practice. Our work also provides managerial insights on how sustainable operations alter traditional supply chain sourcing decisions. It helps practitioners make fast and effective sourcing and investment decisions to implement their sustainability strategies at the operational level.

Curbing the usage of conflict minerals: A supply network perspective

ABSTRACTAn important source of funds for the conflict in the Democratic Republic of the Congo is the revenue from mineral mining. NGOs and legislators made efforts to require manufacturers that use “conflict minerals” to learn and disclose their sources. In the mineral supply chain, the critical link between mines and manufacturers is smelters. We study equilibrium sourcing decisions in the supply network consisting of manufacturers and smelters. We show the equilibrium depends on the total demand of “compliance‐prone” manufacturers, which would choose to be compliant if the prices of certified and noncertified metals were equal. We identify the conditions for the existence of several types of equilibrium: an all‐certified equilibrium where all smelters become certified; an equilibrium where both metal types coexist with no shortage of certified metal; and an equilibrium where both metal types coexist with a shortage of certified metal. In the event that an all‐certified equilibrium is out of reach, we identify how the usage of conflict minerals changes as an NGO or a legislative body targets additional manufacturers. Our model does not incorporate deliberate choices by the mines to become verified conflict‐free, that may enhance the effect of the penalties in the long run. However, in the short‐to‐intermediate run, for a given pool of mines that are verified, an implication of our results is that imposing penalties on manufacturers goes only so far: If penalties induce sufficiently many manufacturers to become compliance‐prone, certified metal may become so expensive that some compliance‐prone manufacturers will not comply.

Natural Disasters and the Reshaping of Global Value Chains

To understand the longer-term consequences of natural disasters for global value chains, this paper examines trade in the automobile and electronic sectors after the 2011 earthquake in Japan. Contrary to widespread expectations, we find that the shock did not lead to reshoring, nearshoring, or diversification across non-Japanese suppliers; and trade in intermediate products was disrupted less than trade in final goods. Imports did shift to new suppliers, especially where dependence on Japan was greater. But production relocated to developing countries rather than to other top exporters, and to larger countries. The results, showing relative inertia in intermediate goods and the dominance of economic fundamentals (cost and scale) in determining sourcing decisions, may help us understand supply chain adjustment after other natural disasters, like the COVID-19 pandemic.