Supplier diversification under binomial yield

February, 2008 We consider supplier diversification in an EOQ type inventory setting with multiple suppliers under binomial yield and zero leadtimes. We characterize the optimal policy for the model and show that, in this case, it does not pay to diversify and it is better to use a sole supplier. This result constitutes a contrast with the previous ones in the literature assuming various yield structures where there is benefit in supplier diversification due to risk pooling effect.