Volume allocation in multi-sourcing: ef...

The network of suppliers and, in particular, the allocation of a buyer’s procurement volumes is one of the key issues in supply chain management when following a multiple-sourcing strategy. This paper proposes a buyer–supplier model which considers a supplier quantity–quality trade-off reflecting the responsiveness of quality to changes in volume. The trade-off is based on the assumption that suppliers are not able to maintain the same level of quality, if quantity increases and vice versa. In order to model the relation between quantity and quality, a generalized logistic function is used. Considering heterogeneous suppliers in terms of the quantity–quality trade-off, we analyze, how different procurement volumes for a product affect the supplier structure of a buyer in a multiple-sourcing buyer–supplier network. An agent-based simulation is applied which is an appropriate approach to study systems of heterogeneous and interacting agents (e.g., buyer and suppliers, interactions between suppliers, mutual effects of parameters). The results show that in such a network not only the procurement volume remarkably shapes the supplier structure and, eventually, may lead to instability. Moreover, the results suggest that less advanced quality management systems on the buyer’s side may increase the stability of the supplier structure.