Dual sourcing strategy in cost-oriented and flexibility-oriented suppliers environment

For a buyer, a multiple sourcing strategy can be adopted to take advantages of different suppliers with their different capabilities. This research studies how a retailer determines its ordering quantities when it has a cost-oriented supplier providing discount and a flexibility-oriented supplier providing backup products. From the analysis results, although adopting dual sourcing strategy may increase retailer's expected sales by satisfying customer's demand, the expected profit with a duple sourcing strategy is not necessarily higher than that with one discount vendor. The profit depends on the ordering quantities from the cost-oriented vendor and from the flexibility-oriented vendor and the expected value of demand function. However, order quantity is affected by related parameters factors. Therefore, a retailer has to allocate its orders to each vendor under deliberate consideration about influential parameters.