Assessing Values-based Sourcing Strategies in Regional Food Supply Networks : An Agent-based Approach
problems , suppliers reneging on contracts ), or disruption risks , which are related to natural and man-made disasters , including earthquakes , hurricanes , fires , and terrorist attacks ( Tang , 2006 ). By having multiple redundant suppliers , organizations can reduce their exposure to both operational and disruption risks , since it is unlikely that all suppliers would be disrupted simultaneously ( Chopra & Sodhi , 2004 ). Because of this , multiple sourcing is one of the most commonly employed supply chain risk mitigation strategies ( Hallikas & Lintukangas , 2016 ).
However , there are disadvantages associated with multiple sourcing . Because multiple sourcing typically involves short-term contracts and frequent rebidding , managing a large number of suppliers increases a buyer ’ s transaction and supply handling costs ( Dyer , Cho , & Chu , 1998 ). Multiple sourcing may also increase supply chain costs by preventing suppliers from achieving economies of scale ( Hahn , Kim , & Kim , 1986 ). Treleven ( 1987 ) argues that multiple sourcing can reduce overall quality as a consequence of the increased variation in incoming quality among suppliers .
In response to these concerns , organizations have increasingly adopted single sourcing as a strategy for some or all of their purchased inputs . Single sourcing strategies strive for the development of partnerships between buyers and suppliers , with an aim to increase cooperation and achieve shared benefits ( Burke , Carrillo , & Vakharia , 2007 ). In these arrangements , buyers and suppliers have jointly aligned goals to accomplish mutually beneficial ends , resulting in collaborative relationships that yield greater benefits than the “ transaction-based ” relationships that characterize multiple sourcing . Such relationships rely on the development of trust between the buyer and supplier , the willingness to coordinate activities and share information , and the ability to convey a sense of commitment to the relationship ( Mohr & Spekman , 1994 ). Single sourcing can yield higher quality and lower total supply chain costs , but only if the supplier is very carefully selected , ideally through a rigorous certification process ( Larson & Kulchitsky , 1998 ). In particular , concentrating purchase volumes with a single supplier can reduce logistics costs , which is important when suppliers are geographically distant from the buyer ( Bozarth , Handfield , & Das , 1998 ). Additionally , reducing the supplier base tends to substantially reduce the volume of communication that is required for supply chain coordination ( Dumond & Newman , 1990 ).
However , when an organization reduces its supplier base , it relies on fewer suppliers for critical materials , and this increased dependency increases the risk of a supply interruption ( Cousins , 1999 ; Smeltzer & Siferd , 1998 ). Also , the amount of trust that is required to support a strong strategic relationship with a supplier is significant , and true long-term strategic alliances between buyers and suppliers are uncommon in practice ( McCutcheon & Stuart , 2000 ).
Once an organization has decided whether or not to have redundancies in its supply base , a method of evaluating and selecting candidate suppliers is needed . Because there are almost always multiple critically important criteria that
25