【IEF Seminar 29】A.P. Changmin Jiang: Single Sourcing vs. Multiple Sourcing-Empirical Evidence from the Airline Industry in the United States


On the morning of 13th April, Changmin Jiang, the associate professor in University of Manitoba, presented a lecture of Single Sourcing vs. Multiple Sourcing: Empirical Evidence from the Airline Industry in the United States in 117, Weiyu building. Teachers and students in the Institution of Economics and Finance participated in the discussion.

The lecture began by introducing the choice of single sourcing and multiple sourcing in the view of costs, quality and supply disruption recovery. The professor next proposed the research questions: Does the risk of disruption induce single sourcing or multiple sourcing? Or does a network airline tend to contract one or multiple regionals to operate in route markets with high chance of disruption? The professor had been taking a empirical evidencefrom domestic airline industry in the United States.

The research divided the airlines into network and regional airlines in the U.S., introducing the differences and the connections between them. Most regional airlines in US operate flights on behalf of network airlines in low density markets.

The professor then put more efforts in explaining the concepts of disruption and disruption recovery. Here, disruption means the failure to follow the contracted schedule, while disruption recovery means the ability to recover differs among regional airlines and varies across time.

After that, the professor presented the method and data using to run the research. Since a measure of disruption is required first, the professor divided the measure of disruption into adverse weather and non-weather delay. After calculating using the econometric model, we have several key findings. Multiple sourcing is a tool to pool risk and to induce suppliers’ effort under the disruption risk due to adverse weather and airport delay.Given that a route is outsourced to independent regionals, the network airline prefers diversified sourcing as the risk of disruption increases. Finally, the professor looked ahead by proposing whether the observations of the US airline industry can be applied to other industries.