Procurement Strategy In The Presence Of Competition And Supply Uncertainty

In the trend of economic globalization, both the external environment and network structure of supply chain are becoming increasingly complex. The enterprises in supply chain will face more and more uncertainty risk. In recent years, natural and man-made disasters are frequent and affect the supply chain procurement, production and distribution activities. The uncertainty of the supply chain mainly includes supply disruption, yield uncertainty and demand uncertainty. We know emergency events may lead to supply disruption, equipment failure may cause the output uncertainty, and climate may changes market demand. In order to resist these risks, the downstream enterprises in supply chain should formulate and implement effective emergency measures. For the enterprise, purchasing management has become an important way to reduce risk and improve profit.In this paper, we investigate procurement strategies in the presence of competition and supply uncertainty. In the first condition, we discuss competing retailers’ procurement strategies in the presence of supply disruption risks. The suppliers make wholesale price first, then two retailers implement the emergency procurement strategy and the optimal allocation procurement strategy to manage supply disruption risks and compete with each other. We find he threshold value is a proxy of supplier’s reliability, which is related to the supplier’s reliability, sales price, underage cost and cost differentials between the two suppliers and plays a critical role in retailer’s procurement decisions. In a competitive environment, the optimal allocation procurement strategy may not bring competitive advantage for retailers. The supplier can influence the threshold value by setting wholesale price so as to get the order. In the second condition, we investigate competing retailers’ outsourcing strategies in the presence of correlated yield and demand uncertainty. Both retailers can choose dual-source procurement strategies or single-source procurement strategies, and they establish a two-stage game theory model. We find both the fixed cost and the correlation between yield and demand uncertainty play a significant impact on game equilibrium. We find dual-source dominates single-source and both retailers use dual-source strategies, if the correlation is relatively high and the fixed cost is low. Otherwise, single-source dominates dual-source and both retailers use single-source strategies. In the third condition, we discuss the impact of cost disruption caused by emergencies on supply chain enterprise。We investigate the problem of stackelberg game in chain-to-chain competition when production costs are disrupted. We compare the pricing and production decisions of both supply chains under production cost disruption with no production cost disruption. And then, we find there is an interval of the disruption cost for both supply chains to keep their decisions unchanged when the disruption occurs. If the cost disruption exceeds the threshold, changing decisions dominates keeping unchanged for retailers.In this paper, we analyze the impact of cost, supplier’s reliability, the correlation between yield and demand uncertainty on competing retailers’ procurement strategies in qualitative and quantitative methods. The results of this paper make great sense for research in future and practice of supply chain management.