Supply-side Risk Management Based On Inventory And Dual-sourcing Strategies

Inventory and dual-sourcing strategies are commonly used to mitigate supply risk.This thesis focuses on investigating how these two strategies are applied in inventorysystems.For a continuous-review inventory system, we consider a risk-averse inventorymanager towards supply disruption risk. We provide Economy Order Quantity un-der Disruption (EOQD) models with consideration of the inverse-S shaped weightingfunction. Both Zero-Inventory-Order (ZIO) and Non-ZIO policies are considered. Weconduct numerical studies to investigate the impacts of weighting function on optimaldecisions and system costs. Our results show that with ZIO policy, ordering more maynot be an efcient way for a risk-averse inventory manager to mitigate supply disrup-tion risk; whereas with Non-ZIO policy, ordering less but more frequently is suggested.For a supply chain with a retailer and a supplier who is subject to random yieldrisk, we model the order and production decisions for the retailer and supplier by usinga Stackelberg game. We consider their risk preferences by incorporating an inverse-S shaped weighting function into the model. By comparing results with risk-averseplayers and with risk neutral players, we observe that the supplier chain is conditionallycoordinated in risk-averse model, while it cannot be coordinated in risk neutral model.Then, we consider a periodic-review inventory system with two suppliers: an un-reliable regular supplier that may be disrupted for a random duration, and a reliablebackup supplier that can be used during a disruption. The backup supplier chargeshigher unit purchasing cost and fixed order cost when compared to the regular supplier.Because the backup supplier is used at unplanned moments, its capacity to replenishinventory is considered limited. Analytical results partially characterize the structureof the optimal order policy: a state-dependent (X(i), Y(i)) band structure (with corre-sponding bounds of X(i) and Y(i) to be given), where i represents the status of theregular supplier. Numerical studies illustrate the structure of the optimal policy and investigate the impacts of major parameters on optimal order decisions and systemcosts.We also discuss a triadic supply chain with a manufacturer, who can sequentiallysource from a low-price primary supplier with yield uncertainty risk; and an high-pricebackup supplier with perfect reliability. We model the contract design problem using aStackelberg game and characterize optimal decisions for the manufacturer. We provideexperimental evidences of horizontal fairness concern from the backup supplier byconducting experiments. Furthermore, the impact of the fairness concern on the supplychain performance is analyzed. We found that decisions for the manufacturer are prettydiferent between a self-interested backup supplier and a fair-minded backup supplier.Although the manufacturer should pay for the fairness concern of the backup supplier,the backup supplier does not always benefit from it.