Strategic thinking in supply and innovation in dual sourcing procurement
by Yohanes Kristianto, Petri Helo
International Journal of Applied Management Science (IJAMS), Vol. 1, No. 4, 2009

Abstract: This paper focuses on decision making related to the use of strategic thinking in dual sourcing. The general purpose is to present a novel approach to managing strategic moves by considering the suppliers' possible actions in terms of supply uncertainty and product substitutability by considering the buyer and the suppliers' payoffs. Strategic competitiveness is optimised by finding the optimum selling price for the buyer and suppliers as well as the innovation level through product substitutability. The results show that innovation makes procurement costs higher in dual sourcing. With respect to managerial implication, this paper suggests that the buyer should encourage innovation by offering higher incentives to the suppliers as well as imposing penalties for lack of promptness in supply. It is also suggested that strategic thinking is appropriate for mass customised and highly innovative products.

Online publication date: Thu, 28-May-2009

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