Transportation’s role in the sole‐ versus dual‐sourcing decision

Current studies indicate that buyers can improve lead‐time performance and reduce total inventory‐system costs by splitting orders between two suppliers. These studies, however, treat transportation only implicitly as an element of the cost of placing an order. This is an important limitation, because shipping costs increase disproportionately as the size of shipment decreases and typically comprise a sizeable portion of total logistics cost. Investigates the role of transportation in the decision to procure from either one or two suppliers. A state‐of‐the art model was first modified to treat transportation costs explicitly and then used to conduct 54 experiments to measure the gains or losses in total logistics costs under a variety of representative conditions.