Dual-Sourcing to Cope with Fluctuations in Agricultural Product Quality Caused by Climate Change
Abstract
problem, we develop a sourcing game where competing firms choose unreliable high-quality and reliable low-quality products to explore the
impacts of fluctuations in agricultural product quality. The outcomes indicate that dual-sourcing where firms source from both high and lowquality supply bases can mitigate that problem. This is because under dual-sourcing the total expected output of the two firms is deterministic
and independent of the supply uncertainty parameters. Hence, firms can make up the shortage from the low-quality supply base after the highquality supply is realized. However, although dual-sourcing has the benefit of flexibility by ordering from the two supply bases, we find firms
may suffer from a dual-sourcing option under certain conditions. Our analysis provides valuable insights for managerial decision making facing climate-induced fluctuations in agricultural product quality.
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DOI: http://dx.doi.org/10.70711/frim.v4i9.10243
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