The Benefits and Constraints of Temporary Sourcing Diversification in Supply Chain Disruption and Recovery

Sourcing diversification is the preferred hedge to supply chain disruption risks, but many companies insist on single-sourcing for long-term strategic benefits. For rare-but-catastrophic disruptions of fortified supply chains, temporary sourcing diversification has been seen as a desirable response strategy. However, little is known about the conditions to temporary sourcing diversification and the situations where it is applicable. Our fieldwork and comparison of two disaster recoveries at Aisin Seiki and Riken Corporation shows that while temporary sourcing diversification worked in the Aisin Seiki case, it was impossible at Riken due to the high degree of specificity required in the design and manufacturing methods of the disrupted product item, suggesting product and process specificity limits recovery alternatives. Unawareness of such constraints to temporary sourcing diversification may result in over-optimism regarding its feasibility and insufficient disaster preparedness. In addition, the case of Riken’s recovery from an earthquake in 2007 is systematically documented in this paper for the first time.