Supplier selection in multiple sourcing: a proactive approach to manage the supply chain risk

Abstract

Literature shows that supply chain risk management (SCRM) has often been involved with increased costs. However, in this paper, we propose a proactive approach to manage the supply chain risk (SCR) with minimal or no cost increases. The basis of this SCRM strategy is dual-sourcing. Moreover, we limit the selection of suppliers with their associated risks by considering suppliers' locations, corporate groups, and next tier suppliers. We test the model with different datasets to examine the relationships between suppliers' costs, corporate group membership, location, and upstream supply chain. In certain conditions, by adding an insignificant amount of cost, our proposed model can design a robust supply chain network. Finally, to demonstrate the applicability of the model, we propose a method to quantify the probability of risk before and after each stage of our model. The results illustrate the impact of our model and scenarios with the best outcome.