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Allocational flexibility in constrained supply chains

Author

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  • Sabbaghi, Navid
  • Sheffi, Yossi
  • Tsitsiklis, John N.

Abstract

We show that when a one-supplier/one-newsvendor supply chain is capacity-constrained, wholesale price contracts have some flexibility in allocating the channel-optimal profit. We analyze how this flexibility changes as we change the supply chain׳s capacity constraint and market demand. We also explore the allocation that is achieved in equilibrium in a newsvendor procurement game. Finally, we generalize our results to risk-sharing contracts and show that those contracts also gain additional flexibility in allocating the channel-optimal profit.

Suggested Citation

  • Sabbaghi, Navid & Sheffi, Yossi & Tsitsiklis, John N., 2014. "Allocational flexibility in constrained supply chains," International Journal of Production Economics, Elsevier, vol. 153(C), pages 86-94.
    • Handle: RePEc:eee:proeco:v:153:y:2014:i:c:p:86-94
    DOI: 10.1016/j.ijpe.2014.01.014
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    References listed on IDEAS

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