International Journal of

Business & Management Studies

ISSN 2694-1430 (Print), ISSN 2694-1449 (Online)
A Resilience-based Sourcing Model with the Numerical Optimization of Suppliers under Global Supply Disruption Risks

Abstract


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.