Supplier default dependencies: Empirical evidence from the automotive industry

Wagner, Stephan M. ; Bode, Christoph ; Koziol, Philipp

Document Type: Article
Year of publication: 2009
The title of a journal, publication series: European Journal of Operational Research : EJOR
Volume: 199
Issue number: 1
Page range: 150-161
Place of publication: Amsterdam [u.a.]
Publishing house: Elsevier
ISSN: 0377-2217
Publication language: English
Institution: Business School > Stiftungslehrstuhl für Procurement (Bode 2014-)
Subject: 650 Management
Keywords (English): Supply chain management ; Supplier default ; Sourcing strategy ; Supplier portfolio ; Default dependence ; Copulas
Abstract: Common ways to mitigate the detrimental consequences of supplier bankruptcies are to install redundancy and to pursue a multiple-sourcing strategy. This is based on the assumption that the adverse event of one supplier going out of business is largely independent from the default of other suppliers. However, this implicit assumption does not hold in all cases. This study – based on empirical data from automotive suppliers – reveals that default dependencies among suppliers do often exist and can have significant consequences. We use copula functions, a method of representing joint distribution functions with particular marginals, to capture the default dependence between automotive suppliers and to simulate various default dependence scenarios. We also conduct a comparative static analysis illustrating the significant impact of default correlation in a supplier portfolio. Our findings should spur managers to analyze their supplier portfolios with respect to default dependencies, and to take this phenomenon into consideration when making sourcing decisions.

Dieser Datensatz wurde nicht während einer Tätigkeit an der Universität Mannheim veröffentlicht, dies ist eine Externe Publikation.

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