Fifteen. Using Supplier Portfolios to Manage Demand Risk

  1. Panos Kouvelis2,
  2. Lingxiu Dong2,
  3. Onur Boyabatli3 and
  4. Rong Li3
  1. Victor Martínez-de-Albéniz

Published Online: 11 OCT 2011

DOI: 10.1002/9781118115800.ch15

The Handbook of Integrated Risk Management in Global Supply Chains

The Handbook of Integrated Risk Management in Global Supply Chains

How to Cite

Martínez-de-Albéniz, V. (2011) Using Supplier Portfolios to Manage Demand Risk, in The Handbook of Integrated Risk Management in Global Supply Chains (eds P. Kouvelis, L. Dong, O. Boyabatli and R. Li), John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9781118115800.ch15

Editor Information

  1. 2

    Olin Business School, Washington University, St. Louis, Missouri, USA

  2. 3

    Lee Kong Chian School of Business, Singapore Management University, Singapore

Author Information

  1. IESE Business School, University of Navarra, Barcelona, Spain

Publication History

  1. Published Online: 11 OCT 2011
  2. Published Print: 4 NOV 2011

ISBN Information

Print ISBN: 9780470535127

Online ISBN: 9781118115800

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Keywords:

  • demand risk;
  • dynamic model;
  • progressive demand revelation;
  • static model;
  • supplier portfolios

Summary

This chapter presents two models where supplier portfolios can be optimized. The first model analyzes how to build a supply options portfolios in a static environment, at the beginning of a new selling season. The second model considers a dynamic setting where the buyer, before the beginning of the season, receives updated demand forecasts, and sequentially places orders with the suppliers that are fast enough to deliver before sales start. These models capture the basic trade-offs involved in multisourcing in many industries. The chapter provides simple guidelines on how to use portfolios, focusing on the operational and tactical level. It focuses on the case of a buyer that obtains supply from two suppliers. In the static model, the portfolio is advantageous since each supplier has a different cost structure to provide flexibility. In the dynamic model, supplier flexibility is modeled through lead time.

Controlled Vocabulary Terms

demand risk; Dynamic supply portfolio; Static supply portfolio