As the COVID-19 has exposed the shortcomings of
globalized supply chains and logistics networks, the numerical optimization of
an offshore supply base with lower-risk suppliers is receiving significant
attention from buying firms to consider as a practical option for resilience
improvement and risk mitigation. Firms may improve their resilience performance
by reducing their foreign supplier dependency and diversifying suppliers in
number. However, reshaping their supply base with the increased foreign
supplier redundancy may not be equally effective to every firm, and resilience
improvement may not always result in greater economic returns. Therefore,
business enterprises should have the ability to evaluate whether the chosen
number of offshore suppliers will present the optimum conditions for the
cost-effective resilience level they need to minimize supply disruption risks.
To address this issue, we propose a risk-resilience-based supplier optimization
model under short- and long-term contract procurement
situations and assess the numerical optimization solutions against
their impact on the financial performance of the buyers’ offshore supply chain.
Focusing on the simultaneous effect of wholesale price uncertainty and the
number of suppliers held in an offshore supply chain, we provide essential
conditions and properties of the resulting optimization functions with decision
rules to determine the best supplier choice set that can generate resilience
for risk mitigation while maximizing supply chain profitability. We further
show how buying firms can make optimum-number-of-offshore-supplier decisions
with supply base resilience in different supplier preference ratings and
unforeseeable supply disruption circumstances.
