This paper investigates the strategic sourcing choice of an original equipment manufacturer (OEM) in the presence of contract manufacturer (CM) encroachment and reliability improvement. In the absence of CM encroachment, the OEM prefers dual sourcing when the fixed ordering cost is small. In contrast, faced with CM encroachment, the OEM may switch its sourcing strategy from single sourcing to dual sourcing as the level of competition increases. Moreover, a higher reliability investment cost enhances the OEM's propensity to choose dual sourcing strategy. Furthermore, the OEM is more likely to choose a single sourcing strategy when the initial yield rate is higher. Under certain specific conditions, both the competitive CM and the OEM are better off when the OEM chooses the single (dual) sourcing strategy, thereby establishing a win–win situation.
|Original language||English (US)|
|Journal||Transportation Research Part E: Logistics and Transportation Review|
|State||Published - May 2021|
Bibliographical noteFunding Information:
This work is supported by the National Natural Science Foundation of China (No. 71771164 and No. 71702129), Humanity and Social Science Youth Foundation of Ministry of Education of China (No. 17YJC630232).
© 2021 Elsevier Ltd
- CM encroachment
- Dual sourcing
- Reliability improvement
- Supply chain management
- Supply uncertainty