Recovering Global Supply Chains from Sourcing Interruptions: The Role of Sourcing Strategy

40 Pages Posted: 28 Oct 2015 Last revised: 21 Oct 2020

See all articles by Nitish Jain

Nitish Jain

London Business School

Karan Girotra

Cornell Tech; Cornell SC Johnson College of Business

Serguei Netessine

The Wharton School, University of Pennsylvania

Date Written: October 17, 2020

Abstract

Problem definition: Fast recovery from sourcing interruptions is a key objective for global supply chains and for business continuity professionals. In this paper, we study the impact of different supply chain strategies—supplier diversification and the use of long-term relationships—on the ability of a supply chain to recover from sourcing interruptions.

Academic/Practical relevance: Improving supply chains' recovery ability has been an important focus area for both practitioners and academics. Collectively, available anecdotal evidence and theoretical analyses provide ambiguous recommendations driven by competing effects of different sourcing strategies. Our paper provides the first rigorous and large-scale empirical evidence relating the use of different supply chain strategies to the ability of a supply chain to recover from supply-interruptions.

Methodology: We develop a compound estimator of a supply-chain's recovery rate that can be constructed using limited available data (only the time series of firms' actual sourcing behavior). Using more than two and half million import manifests, we extract firms' maritime sourcing transactions and we use this data to estimate recovery rates of different firm-category supply chains of publicly traded US firms.

Results: We find that supplier diversification is associated with slower recovery from sourcing 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.

Managerial implications: Our paper brings important empirical evidence to the hitherto theoretical debate on the impact of sourcing strategies on faster recovery in supply chains. We therefore provide actionable advice on supply chain design for faster recovery.

Keywords: supply chain, sourcing interruption, supplier diversification, long-term relationships, empirical analysis, time to recovery

Suggested Citation

Jain, Nitish and Girotra, Karan and Netessine, Serguei, Recovering Global Supply Chains from Sourcing Interruptions: The Role of Sourcing Strategy (October 17, 2020). 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)

Cornell Tech ( email )

111 8th Avenue #302
New York, NY 10011
United States

HOME PAGE: http://www.girotra.com

Cornell SC Johnson College of Business ( email )

Ithaca, NY 14850
United States

HOME PAGE: http://www.girotra.com

Serguei Netessine

The Wharton School, University of Pennsylvania ( email )

3730 Walnut Street
Philadelphia, PA 19104-6367
United States
(215) 573 3571 (Phone)

HOME PAGE: http://www.netessine.com

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