Dual versus Triple Sourcing: Decision-Making under the Risk of Supply Disruption

This paper studies three different strategies of sourcing. The whole process of this research including the problem definition is exactly based on a real case condition. This paper model sourcing process of required parts and material for a product which is manufactured under the license of Peugeot Company, the mother manufacturer in France. Based on the agreement between Peugeot and the manufacturer in Iran, all the parts should be supplied from a certified suppliers of the mother company. This paper investigates a single product setting in which a firm can source from multiple suppliers. One supplier has unreliable capacity but it is the first choice of supply because of being in partnership with Peugeot and the opportunity for future cooperation, while other suppliers are reliable but with lower product quality and not in direct relation with Peugeot. The addressed context, in which a case study has been made, is disruption due to sanctions which cause failure in the sourcing from the unreliable supplier. The main focus of current work is on defining the share of each supplier, and finding suitable sourcing policy (single, dual or triple sourcing) to apply for different probabilities of disruption. The paper is concludes in sensitivity analysis of different parameters such as set-up cost, and reveals their impact on final suggested strategy of sourcing