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Vulnerable options in supply chains: Effects of supplier competition
Article first published online: 28 JUL 2006
DOI: 10.1002/nav.20181
Copyright © 2006 Wiley Periodicals, Inc.
Issue
1520-6750/asset/cover.gif?v=1&s=1bdad4849bee8229bbc4053fa1d796b87c453243 "Naval Research Logistics (NRL)")
Naval Research Logistics (NRL)
Special Issue: Special Issue on Applications of Financial Engineering in Operations, Production, Services, Logistics, and Management
Volume 53, Issue 7, pages 656–673, October 2006
Additional Information
How to Cite
Babich, V. (2006), Vulnerable options in supply chains: Effects of supplier competition. Naval Research Logistics, 53: 656–673. doi: 10.1002/nav.20181
Publication History
- Issue published online: 29 AUG 2006
- Article first published online: 28 JUL 2006
- Manuscript Accepted: 16 MAR 2006
- Manuscript Revised: 30 SEP 2005
- Manuscript Received: 28 AUG 2004
- Abstract
- References
- Cited By
Keywords:
- resilient supply chains;
- supply risk;
- supply disruptions;
- competition;
- deferment option;
- multi-sourcing;
- back-up supplier;
- default correlation
Abstract
Concerned with the risk of supplier default, a firm may choose to diversify its orders among multiple suppliers. Furthermore, the discrepancy in production lead-times among suppliers furnishes a firm with a valuable option to defer ordering decisions until uncertainty has been partially resolved. The suppliers also have an option: to defer their pricing decisions. Using a single-period, multi-stage model of a two-echelon supply chain with competing risky suppliers and a single manufacturer, this paper investigates how the supplier default risk and default co-dependence affect manufacturer procurement and production decisions, supplier pricing decisions, firms profits, and the deferment option value and how the introduction of the deferment option alters supplier competition. © 2006 Wiley Periodicals, Inc. Naval Research Logistics 2006