Sourcing with recycled materials: a contingent sourcing model with supply unavailability and setup time uncertainty for ripple effect mitigation

ABSTRACT

In this study, a multi-period contingent sourcing model for sustainable sourcing is developed to mitigate the ripple effect caused by supply disruption. In this model, the manufacturer's main supplier is a recycled materials supplier who is subject to random disruptions and whose materials have setup time uncertainty. His backup supplier is a virgin materials supplier who is reliable. We investigate how the manufacturer's attitude towards risk affects his absorptive-capacity decision making and his sourcing strategy, both of which have not been addressed in the related literature. Our analyses reveal that the manufacturer's decisions are strategic substitutes as cost-related parameters (except the product holding cost) vary when he is risk-neutral and can become strategic complements when he is averse to risk. Furthermore, the manufacturer can improve contingent sourcing performance by leveraging adaptive capacity through choosing the proper timing at which to switch to the backup supplier. Finally, the manufacturer's sourcing strategy is sensitive to attitude towards risk when the cost difference between virgin and recycled materials is within a specific range over which higher restorative capacity from the main supplier and lower setup time uncertainty with recycled materials are required to justify a more risk-averse manufacturer's adoption of contingent sourcing.

KEYWORDS:

• Ripple effect
• contingent sourcing
• recycling
• setup time uncertainty
• supply disruption

Acknowledgments

The authors thank the area editor and two anonymous referees for their constructive comments and suggestions, which greatly enhanced the paper. This research was partly supported by Ministry of Science and Technology, Taiwan, R.O.C., under grant MOST-104-2410-H-006-048-MY2.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 The sixth and seventh domains each are decomposed into two disjoint regions in order for integration to be properly evaluated.

Additional information

Funding

This research was partly supported by Ministry of Science and Technology, Taiwan, R.O.C., under grant MOST-104-2410-H-006-048-MY2.

Notes on contributors

Chung-Chi Hsieh

Chung-Chi Hsieh is a professor in Department of Industrial and Information Management at National Cheng Kung University in Tainan, Taiwan. He holds both Master's and Ph.D. degrees from Industrial and Operations Engineering at University of Michigan, Ann Arbor. His research interests include supply chain management, production economics, and interface between operations and marketing.

Hung-Lin Chang

Hung-Lin Chang is a manufacturing section manager at Taiwan Semiconductor Manufacturing Company. He is in charge of managing control wafers and dummy wafers in order to balance the WIP levels of these wafer types and production throughout. He holds a Master's Degree in Industrial and Information Management from National Cheng Kung University, Taiwan. His research interests include remanufacturing, supply chain management, and sustainability.