Supply Chain Finance: How Do Supply Chain Strategies Perform in Mitigating Supply Chain Disruption and Commodity Price Volatility Risks?

Abstract

We adopt the supply chain (SC)-oriented perspective to investigate how operations and SC management decisions may help firms in dealing with two major challenges of SC finance, SC disruptions, and commodity price volatility (CPV). We develop a model that combines a novel problem setting to holistically investigate the effect of multiple sourcing under supply disruptions and price volatility. Such a combination is unique in the literature and captures some of the complexities of sourcing decisions in practice. Through a real case, we find that multiple sourcing may be robust to mitigate disruption and CPV risks, although it is paramount to assess the value of the strategy before its implementation. We provide a framework for decision makers aiding managers determining in which conditions multiple sourcing is best suited to mitigate risks and improve firm's cash flow and profitability. Our article makes an important contribution by shaping for the first time a model that can be used to theoretically understand the effectiveness of sourcing strategies in mitigating supply disruptions and CPV risks appearing simultaneously. It contributes to the industrial practice by providing a model supporting the decision making of firms in shaping their sourcing strategy.