Managing Risks of Supply-Chain Disruptions: Dual ... - CiteSeerX

3.3 Multiple Sourcing as a way to fight against disruptions insupplySince 9/11managers are more aware than ever of the risks that can represent single sourcing andthis approach may have to be revisited. Many experts in supply-chain management and purchasingadvise firms to consider more flexible sourcing strategies. Lee and Wolfe (2003) suggest a list ofpossibilities:- “Develop multiple supply sources for the same component or input material that will costeffectively enhance flexibility”. Adding suppliers often comes with important costs, andfirms must look for sourcing strategies that “combine flexibility with cost-efficiency”. Thenew procurement strategy of Hewlett-Packard is a good illustration. First, it relies on asupplier for a fixed quantity and thus enhances efficiency. Then, it calls on a secondsupplier for flexible quantities, with a lower and higher volume limits, and consequentlyhigher prices. At last, in case demand comes over the quantities contracted with those 2suppliers, HP buys on the spot market. Martinez-de-Albeniz (2003) studied this approachand proposed a framework to help managers find the optimal portfolio. His work ispresented in the appendix A.- “Create a local supply source”. Firms can use local suppliers to supplement their mainforeign base in case the demand increases faster than expected, or in case of disruption. HPuses this approach for their DeskJet printers. Their main supplier is in Singapore to benefitfrom the lower costs of this country, and at the same time it has a local source of supply inVancouver to respond faster to North American market. This paper studies more in detailthis specific solution.- “Create multiple supply sources with the appropriate manufacturing capacities to build thecomponent when needed. Instead of having multiple suppliers for the same component, acompany would merely reserve manufacturing capacity in several suppliers’ facilities.”And the company would call on one of these vendors in case of problem with the currentsupplier. Obviously, this require an investment but will provide with the requiredflexibility,- “Use a supplier with more than one manufacturing site”.30