The Benefits and Constraints of Temporary Sourcing Diversification in Supply Chain Disruption and Recovery

Journal of Purchasing & Supply Management (Forthcoming)

38 Pages Posted: 5 Jun 2014

See all articles by Daniel Whitney

Daniel Whitney

Massachusetts Institute of Technology (MIT) - Center for Technology, Policy, and Industrial Development (CTPID)

Jianxi Luo

Singapore University of Technology and Design (SUTD)

Daniel Heller

Yokohama National University

Date Written: June 4, 2014

Abstract

Sourcing diversification is the preferred hedge to supply chain disruption risks, but many companies insist on single-sourcing for long-term strategic benefits. For rare-but-catastrophic disruptions of fortified supply chains, temporary sourcing diversification has been seen as a desirable response strategy. However, little is known about the conditions to temporary sourcing diversification and the situations where it is applicable. Our fieldwork and comparison of two disaster recoveries at Aisin Seiki and Riken Corporation shows that while temporary sourcing diversification worked in the Aisin Seiki case, it was impossible at Riken due to the high degree of specificity required in the design and manufacturing methods of the disrupted product item, suggesting product and process specificity limits recovery alternatives. Unawareness of such constraints to temporary sourcing diversification may result in over-optimism regarding its feasibility and insufficient disaster preparedness. In addition, the case of Riken’s recovery from an earthquake in 2007 is systematically documented in this paper for the first time.

Keywords: Supply chain disruption; disaster; risk management; temporary diversification; single-sourcing; product specificity; asset specificity; case studies

Suggested Citation

Whitney, Daniel and Luo, Jianxi and Heller, Daniel, The Benefits and Constraints of Temporary Sourcing Diversification in Supply Chain Disruption and Recovery (June 4, 2014). Journal of Purchasing & Supply Management (Forthcoming), Available at SSRN: https://ssrn.com/abstract=2445770

Daniel Whitney

Massachusetts Institute of Technology (MIT) - Center for Technology, Policy, and Industrial Development (CTPID) ( email )

77 Massachusetts Ave
Room E40-243
Cambridge, MA 02139
United States
(617) 253-6045 (Phone)

Jianxi Luo (Contact Author)

Singapore University of Technology and Design (SUTD) ( email )

8 Somapah Rd
Singapore, 487372
Singapore

Daniel Heller

Yokohama National University ( email )

Tokiwadai, Hodogaya-Ku, Yokohama
Yokohama, Kanagawa
Japan

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