The Dual Source Dilemma

You are the sourcing manager for a new product, and every decision you make — how much to order, from which supplier, and when — will show up in your final bank balance. In The Dual Source Dilemma, cheap is not always better, fast is not always necessary, and what feels like a reasonable call today can quietly erode your financial position several periods later. The goal is not to minimise cost or maximise service in any given week — it is to understand how sourcing, inventory, and cash are connected across time, and to manage that system well enough to finish in the black.

Authors:

Dr. Debashish Jena

Academic Partner:

LEVEL

Undergraduate, MBA, Executive Ed, Graduate

TYPE

Single Player

DURATION

90 mins

DISCIPLINE

Operations Management

Introduction

The Dual Source Dilemma is a single-player procurement simulation that places participants in the role of a sourcing manager responsible for a new product facing uncertain demand. Across multiple periods, participants allocate orders between two suppliers with fundamentally contrasting profiles: Surat, a fast but expensive supplier with a short lead time, and Bangladesh, a slow but economical supplier with a longer lead time. Starting with zero cash and zero inventory, participants borrow to fund purchases and repeatedly make sourcing decisions while managing random demand, inventory levels, backlogs, and cash balances.

Performance is evaluated on the final bank balance at the end of the simulation — not on period-by-period service levels or cost minimisation. This design forces participants to confront the compounding effects of interest, holding costs, and backlog costs, and to recognise how early sourcing decisions propagate through the system in ways that are often delayed, non-intuitive, and difficult to reverse.

Learning Objectives

Identify bottlenecks via WIP patterns
Apply DBR to stabilise production flow
Use TOC steps to manage constraints
Balance batch size vs setup efficiency
Prioritise products by constraint throughput

Key Features

Two suppliers with asymmetric profiles — Surat (short lead time, higher cost) and Bangladesh (long lead time, lower cost) — requiring dynamic allocation across every period
Preparation phase before active demand begins, allowing participants to build initial inventory while managing cash constraints and borrowing
Stochastic demand generated from a configurable distribution, exposing participants to genuine uncertainty across periods
Final bank balance as the sole performance metric, capturing the cumulative financial impact of all sourcing, inventory, and cash flow decisions
Fully customisable parameters including lead times, demand distribution, gross margins, interest rate, backlog and holding costs, and simulation duration

Educational Outcomes

Understand how procurement decisions drive inventory levels, backlog formation, and cash flows — including borrowing and interest — over multiple periods
Recognise how lead time amplifies forecast risk and increases exposure to inventory mismatch under demand uncertainty
Appreciate the compounding effects of interest, holding costs, and backlog costs on long-term financial performance
Experience how early sourcing decisions propagate through the system with delayed and often non-intuitive consequences
Develop a systems perspective in which sourcing, inventory, and financial decisions are evaluated through their cumulative effect rather than their period-by-period outcomes

Topics Covered

Dual Sourcing Strategy

Inventory Dynamics & Backlog Management

Lead-Time Economics

Cash Flow Management in Procurement

System Dynamics in Operations