Break up or tolerate? The post-disruption cooperation in global supply chains

AbstractDue to globalisation and outsourcing, a manufacturer may suffer supply disruptions from the overseas supplier whose capacity is impaired by unruly events such as pandemic and geopolitical tensions. Since the recovery process of the overseas supplier’s capacity after the disruption is unpredictable, the manufacturer faces a choice of whether to continue cooperation or to shift to localised procurement. This paper first explores the effects of disruptions on the global supply chain, then considers the option to order from local suppliers. The results reveal that the overseas supplier whose capacity is affected by disruption at various degrees would take different actions, including raising the wholesale price, disguising its capacity impaired, or passing up the opportunity to cooperate with the manufacturer. In addition, we propose a tolerating strategy for the manufacturer and provide a long-term insight into supplier selection. The results show that the tolerating strategy can foster cooperation and enhance supply chain visibility. Notably, we find that manufacturers serving large markets can benefit from allowing the overseas supplier to recover gradually. Moreover, we discuss the importance of flexibility in designing the tolerating strategy.KEYWORDS: Global supply chainpost-disruptionsupplier selectionordering strategytolerating strategy AcknowledgementsThe work is supported by the National Natural Science Foundation of China (Nos. 72171047, 71771053 and 72001113), the Natural Science Foundation of Jiangsu Province (No. BK20201144), the Postgraduate Research & Practice Innovation Program of Jiangsu Province (No. KYCX22_0249), and the Natural Science and Engineering Research Council of Canada Discovery Grant (No. 2018-06690).Disclosure statementNo potential conflict of interest was reported by the author(s).Data availability statementAll data are available upon request.Notes1 https://www.accenture.com/us-en/about/company/coronavirus-supply-chain-impact2 https://www.mckinsey.com/industries/automotive-and-assembly/our-insights/reimagining-the-auto-industrys-future-its-now-or-never3 https://www.tirebusiness.com/manufacturers/michelin-raising-consumer-tire-prices-us-canada-march-164 https://edition.cnn.com/2020/02/19/business/jaguar-land-rover-chinese-parts-coronavirus/index.html5 https://www.yicaiglobal.com/news/chinese-car-parts-makers-resort-to-charter-flights-to-keep-global-clients6 https://www.brecorder.com/news/5791417 https://english.kyodonews.net/news/2020/02/5734789c1857-update1-toyota-to-further-delay-restart-of-china-plants-due-to-virus-outbreak.html8 https://www.cnbc.com/2019/12/30/tesla-shanghai-factory-is-reportedly-making-1000-model-3s-per-week.htmlAdditional informationFundingThis work was supported by National Natural Science Foundation of China: [Grant Number 72171047, 71771053 and 72001113]; Natural Science Foundation of Jiangsu Province: [Grant Number BK20201144]; Natural Science and Engineering Research Council of Canada Discovery Grant: [Grant Number 2018-06690]; Postgraduate Research & Practice Innovation Program of Jiangsu Province: [Grant Number KYCX22_0249].Notes on contributorsShibo JinShibo Jin received the master degree from School of Business, East China University of Science and Technology. He is currently pursuing the PhD degree in Management Science and Engineering from School of Economics and Management, Southeast University. His current research interests include supply chain risk management, inventory management, and system control and optimisation.Yong HeYong He is a professor at School of Economics and Management, Southeast University, China. His research interests include supply chain management, logistics management, marketing/OM interfaces, food supply chains, sustainable supply chain management, and service science.Shanshan LiShanshan Li is a Lecturer at the School of Finance, Nanjing Audit University. She received the Ph.D. degree in Management Science and Engineering from the School of Economics and Management, Southeast University (China). Her research interests include supply chain risk management, operations planning and control, and supply chain financing.Xuan ZhaoXuan Zhao is a Professor at the Operation and Decision Sciences, Lazaridis School of Business and Economics, Wilfrid Laurier University. She holds a Ph.D. in the joint fields of Management Science and Transportation/Logistics from the University of British Columbia. Her research involves utilising the tools of Management Science/Operations Research and Economics to model, analyse, and derive insights into problems in the areas of Supply Chain Management, Marketing/OM interfaces, Revenue Management, Entrepreneurships, and Sustainable Operations. Her research papers appear in prestigious refereed journals in operations such as Manufacturing & Service Operations Management, Production and Operations Management, IISE Transactions, European Journal of Operational Research, Naval Research Logistics, Transportation Research Part E as well as marketing journals such as Quantitative Marketing and Economics and European Journal of Marketing.