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SOURCING STRATEGIES IN A SUPPLY CHAIN

By

GERARD JOSEPH BURKE JR.

A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY

UNIVERSITY OF FLORIDA

2005

UMI Number: 3192358

UMI Number: 3192358 Copyright 2006 UMI Microform 3192358 by ProQuest Information and Learning Company. All rights
UMI Number: 3192358 Copyright 2006 UMI Microform 3192358 by ProQuest Information and Learning Company. All rights

Copyright 2006

UMI Microform 3192358

by ProQuest Information and Learning Company.

All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code.

ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, MI 48106-1346

Copyright 2005 by Gerard Joseph Burke Jr.

This work is dedicated to my family, and especially my wife, Amy, for your love and support.

ACKNOWLEDGMENTS The hard work and dedication required by me to create this dissertation were made possible by the personal and practical support of my family, friends, committee members and other members of the Decision and Information Sciences Department. I wish to express my gratitude by specifically acknowledging each group of supporters. I wish to thank God; my parents, Jerry and Carlyn; my wife, Amy; my chil- dren, Maddie, Marley, Ella and James; my grandfather, Frank Burke (whose support is priceless); and my mother-in-law, Deb Crenshaw for their love, inspira- tion, and support. I also thank my Hoosier family, Hank and Betty Tallman, Jim and Joni Ping, Jeannie Meenach, and Drew and Pam Kissel for their unwavering encouragement, love and much needed breaks from my studious endeavors. Although this next group for gratitude is legally not considered family, they are closer to me than friendship describes. I wish to thank Lou and Sandy Paganini, and Ed and Atwood Brewton for their support, faith, and perspective. Also, many thanks go to the Kempers and Nelsons for their friendship. My doctoral studies were greatly enriched by the comradery of my fellow doc- toral students Mark Cecchini, Selcuk Colak, Enes Eryarsoy, Ling He, Jason Dean, Yuwen Chen, Christy Zhang, Fidan Boylu, and Michelle Hanna. Additionally, I would like to thank Pat Brawner, Shawn Lee, and Cindy Nantz for assisting me throughout this tribulation. My capability to complete this dissertation was developed in large part by the seminars and coursework taught by members of my dissertation committee. I wish to thank Janice Carrillo, Selcuk Erenguc, Anand Paul, and Joe Geunes for their

iv

instruction and service on my dissertation committee during my doctoral studies. I also wish to thank Janice Carrillo for candidly sharing her experiences in the academic profession. Finally, I wish to thank Professor Asoo Vakharia, my advisor and committee chair, for his expert guidance, timely responses to the drafts of each chapter of my dissertation, and genuine interest in my personal and professional well-being.

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TABLE OF CONTENTS

 

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ACKNOWLEDGMENTS

 

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LIST OF TABLES

 

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ix

ABSTRACT

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xi

CHAPTER

1 INTRODUCTION

 

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1

1.1 Supply Chain Management-An Overview

 

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1.2 Strategic Issues in SCM

 

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1.2.1 Product Strategy

 

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1.2.2 Network Design

 

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1.3 Operational Issues in SCM

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1.3.1 Transportation

 

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1.3.2 Transformation

 

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1.3.3 Information Sharing

 

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1.4 Focus of this Research: Strategic Sourcing

 

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1.5 Organization of this Dissertation

 

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1.6 Statement of Contribution

 

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2 LITERATURE REVIEW

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2.1 Overview

 

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2.2 Strategic Evolution of Sourcing

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2.3 Buyer-Supplier Relationships

 

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2.4 Strategic Sourcing

 

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18

 

2.4.1 Qualification Criteria

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2.4.2 Selection and Allocation

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3 STRATEGIC SOURCING DECISIONS WITH STOCHASTIC SUP-

 

PLIER RELIABILITY

 

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27

3.1 Introduction

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3.2 Sourcing Model

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28

3.3 Model Development

 

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30

3.4 Analysis

 

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30

 

3.4.1 Heterogeneous Suppliers

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31

3.4.2 Heterogeneous Cost Suppliers

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3.4.3

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3.4.4

Homogeneous Suppliers

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37

3.5 Numerical Analysis

 

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39

3.5.1

Experimental Design

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39

3.5.2

Results

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40

3.6 Conclusions

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44

4 IMPACT OF SUPPLIER PRICING SCHEMES AND CAPACITY ON

 

SOURCING STRATEGIES

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48

4.1 Introduction

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4.2 Sourcing Model

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50

4.2.1 Preliminaries

 

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50

4.2.2 Supplier Pricing Schemes and Capacity

 

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4.3 Analysis and Insights

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52

4.3.1 Constant Price

 

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52

4.3.2 Linear Discount Price

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4.3.3 Incremental Units Discount Price

 

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4.3.4 All Units Discount Price

 

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4.3.5 Summary of Insights from Analysis

 

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4.4 Application

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4.5 Optimal Algorithm for Incremental Quantity Discounted Sourcing 64

4.5.1 Algorithm Description

 

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4.5.2 Computation and Validity of LB p and UB f

 

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4.5.3 The Branching Process

 

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4.5.4 Formal Statement of the Algorithm

 

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4.6 Conclusions

 

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68

5 STRATEGIC SOURCING WITH DIVERSIFICATION CONSIDERA- TION

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5.1 Introduction

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5.2 Integrated Selection/Allocation Model

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5.2.1 Preliminaries

 

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5.2.2 Model Development

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5.3 Analysis

 

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5.3.1 No Diversification Benefit

 

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5.3.2 Diversification Benefit

 

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5.4 Model Extensions

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5.5 Numerical Analysis

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5.5.1 Experimental Design

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5.5.2 Results

 

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5.6 Conclusions and Implications

 

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91

vii

6 SUMMARY

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94

6.1 Key Results and Directions for Future Research from Chapter 3 . 94

6.2 Key Results and Directions for Future Research from Chapter 4 . 96

6.3 Key Results and Directions for Future Research from Chapter 5 . 98

APPENDIX .

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100

A PROOFS FOR CHAPTER 3

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100

A.1

Proof of Corollary 3.1

 

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100

A.2

Proof of Theorem 3.1

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101

A.3

Proof of Corollary 3.2

 

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102

A.4

Proof for Corollary 3.3

 

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102

A.5

Proof of Corollary 3.4

 

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102

A.6

Proof of Corollary 3.5

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103

A.7

Proof of Corollary 3.6

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103

A.8

Proof of Theorem 3.2

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104

A.9

Proof of Theorem 3.3

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104

A.10

Proof of Theorem 3.4

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104

A.11

Proof of Corollary 3.7

 

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104

B PROOFS FOR CHAPTER 4

 

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106

B.1

Proof of Theorem 4.1

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