Recovering from Supply Interruptions: The Role of Sourcing Strategy

37 Pages Posted: 28 Oct 2015 Last revised: 19 Aug 2016

Nitish Jain

London Business School

Karan Girotra

INSEAD - Technology and Operations Management

Serguei Netessine

INSEAD

Date Written: August 17, 2016

Abstract

Fast recovery from supply interruptions is a key objective of supply chain and business continuity professionals. This paper provides the first rigorous and large-scale empirical evidence that relates the use of different supply chain strategies — supplier diversification and the use of long-term relationships — with the ability of a supply chain to recover from supply interruptions. We develop an estimator of a supply-chain’s recovery rate that can be constructed using the limited available data — only the time series of firms’ actual sourcing behavior. Using more than two million import manifests, we extract firms’ sourcing transactions and use these data to estimate recovery rates of different firm-category supply chains of publicly traded US firms. We find that supplier diversification is associated with slower recovery from supply interruptions, while the use of long-term relationships is associated with faster recovery. A one standard deviation decrease in the former is associated with a 16% faster recovery, and a like increase in the latter is associated with a 20% faster recovery.

Keywords: Supply Interruption, Supply Chain Management, Supplier Diversification, Longterm Relationships, Empirical Analysis, Time to Recovery

Suggested Citation

Jain, Nitish and Girotra, Karan and Netessine, Serguei, Recovering from Supply Interruptions: The Role of Sourcing Strategy (August 17, 2016). INSEAD Working Paper No. 2016/58/TOM. Available at SSRN: https://ssrn.com/abstract=2682522 or http://dx.doi.org/10.2139/ssrn.2682522

Nitish Jain

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Karan Girotra (Contact Author)

INSEAD - Technology and Operations Management ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France

Serguei Netessine

INSEAD ( email )

Boulevard de Constance
77305 Fontainebleau Cedex
France
+33 (0)1 60 72 92 25 (Phone)

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