Procurement Strategy with Backup Sourcing under Stochastic Supply Risk

Table 1

Representative studies of dual source procurement.

Authors	Risk profile	Strategy profile	Objective	Characteristics/ Contributions
Yu et al. [5]	Deterministic demand; Supply disruption	Dual sourcing	Sourcing strategy selection	Price-sensitive demand
J. Chen, Zhao and Yun [22]	Stochastic demand; Supply disruption	Dual sourcing	Order decision	A multiperiod inventory system and the backup supplier has limited capacity
Sawik [8]	Deterministic demand; Supply disruption	Dual sourcing	Supplier selection; Order scheduling	Integration of supplier selection and customer order scheduling
Zeng and Yu [16]	Stochastic demand; Stochastic supply risk	Backup sourcing	Reserved capacity; Revenue-sharing contracts	A combination of a decision-tree and the Nash game is used
Tao, Sethi and Zhang [23]	Deterministic demand; Stochastic supply risk	Dual sourcing	Optimal procurement strategy	Price-sensitive and elastic demand; the two suppliers are both unreliable
Huang and Xu [9]	Stochastic demand; Supply disruption	Backup sourcing & Dual sourcing	Sourcing strategy selection	Coexistence and exclusivity of backup sourcing and dual sourcing
Chen and Xiao [17]	Stochastic demand; Stochastic supply risk	Backup sourcing	Order strategy	The value of backup sourcing in decentralized and centralized channels
Silbermayr and Minner [24]	Deterministic demand; Supply disruption	Dual sourcing	Order allocation	The impacts of supplier characteristics, reliability, cost and learning ability on the procurement strategy
Li and Li [25]	Stochastic demand; Supply disruption	Dual sourcing	Order strategy	Maximizing the expected utility considering a loss-averse preference
Hou, Zeng and Li [7]	Deterministic demand; Supply disruption	Backup sourcing	Capacity reservation contract	The contract has minimum order quantity constraints
Freeman et al. [26]	Stochastic demand; Supply disruption	Dual sourcing	Optimal strategy	Product alternatives are considered
Zhe and Chen [27]	Deterministic demand; Supply disruption	Backup sourcing	Strategy selection	Consider three categories of backup strategic options