Research on Dual Sourcing Strategy with Stochastic Supply Disruptions - A Game-theoretic Approach

Supply chain management mainly refers to a management mode of product manufacturing, transportation, distribution and sales by integrating suppliers, manufacturers, distributors and warehouses to reduce the cost of the whole supply chain. Supply chain is of vital importance to the development of modern enterprises, it has greatly promoted the development of the economy, besides, it has brought great convenience to our life. However, supply chain is vulnerable to disruption risks, therefore, some essential measures are needed to mitigate potential disruptions. To this end, a game-theoretic approach based dual sourcing strategy with stochastic supply disruptions is proposed in this paper, which aims to analyze the influence of each parameter on system performance. First, a benchmark case without supply disruptions is introduced, of which some fundamental results are obtained and analyzed systematically from a theoretical perspective, e.g., wholesale prices, retail prices, sale volume and profits. Then, under supply disruptions, dual sourcing and direct sale strategies are adopted to mitigate the effects caused by supply disruptions, where dual sourcing includes routine and emergency procurement. Also, the expected profit model consisting of four possible cases is established through a simple case. Finally, simulation results and computational analysis demonstrate that the one who leads the supply chain performs better than follower with emergency procurement.