Research on supply chain sourcing decision under the dual disturbance of demand uncertainty and forecast inaccuracy

WANG Junjin, LIU Jiaguo, SHI Lei, ZHOU Huan

Systems Engineering - Theory & Practice ›› 2022, Vol. 42 ›› Issue (11) : 2869-2880.

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Systems Engineering - Theory & Practice ›› 2022, Vol. 42 ›› Issue (11) : 2869-2880. DOI: 10.12011/SETP2021-2320

Research on supply chain sourcing decision under the dual disturbance of demand uncertainty and forecast inaccuracy

  • WANG Junjin1, LIU Jiaguo1, SHI Lei1, ZHOU Huan2
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Abstract

Motivated by the trend of overseas/cross-regional firms returning to domestic/local and the background of COVID-19 normalization, a sourcing decision model is proposed based on the cost-signal game under the demand uncertainty and forecast inaccuracy. We explore the trade-off between the efficient cross-regional sourcing and responsive local sourcing. The results show that the sourcing decision depends on the linkage performances of cost and information. Cross-regional sourcing always brings mighty cost performance, while the local sourcing can not always give full play to information performance advantage. Because if both firms choose local sourcing, the correlation effect between forecast information will hedge signal accuracy effect. Greater demand uncertainty and more accurate cross-regional sourcing forecast are driving films to return. Interestingly, this return may benefit all the firms, and break the Prisoner's Dilemma of symmetric cross-regional sourcing. The reason is that the returning can alleviate competition by inducing a new equilibrium sourcing structure. In response, this mixed equilibrium endows firms with “follower advantage” to realize local-Pareto improvement. With the increase of demand uncertainty and forecast inaccuracy, this mixed equilibrium will turn to the symmetric local sourcing, which temporarily reaches the overall Pareto-optimum. However, it will eventually fall into the Prisoner's Dilemma of lose-lose situation. In addition, it is also found that the poor local sourcing forecast will endow firms with ''mover advantage'', which will lead to the mover becoming better while the follower becoming worse.

Key words

sourcing decision / cross-regional sourcing / local sourcing / demand uncertainty / forecast inaccuracy / COVID-19 epidemic

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WANG Junjin , LIU Jiaguo , SHI Lei , ZHOU Huan. Research on supply chain sourcing decision under the dual disturbance of demand uncertainty and forecast inaccuracy. Systems Engineering - Theory & Practice, 2022, 42(11): 2869-2880 https://doi.org/10.12011/SETP2021-2320

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Funding

Key Project of the National Social Science Foundation of China (22AGL020)
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