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Contract Coordination in Dual Sourcing Supply Chain under Supply Disruption Risk

Author

Listed:
  • Tong Shu
  • Fang Yang
  • Shou Chen
  • Shouyang Wang
  • Kin Keung Lai
  • Lu Gan

Abstract

This paper explores a coordination model for a three-echelon supply chain including two different manufacturers, one distributer and one retailer via the combined option and back contracts. And one manufacturer provides the high wholesale price with low supply disruption risk and the other is completely the opposite. This differs from the previous supply chain coordination model. Firstly, supply disruption is added to the three-echelon supply chain. Secondly, considering the coordination of the supply chain, we deploy the combined option and back contracts which are seldom used in the previous study. Furthermore, it is interesting that supply disruption risk and buyback factor do not affect the distributor’s order quantity from the manufacturer who has low product price and unreliable operating ability, while the order quantity increases with the rise of option premium and option strike price. The distributor’s order quantity from the manufacturer, which has high product price and reliable operating ability, increases with the rise of supply disruption risk but decreases when the buyback factor, option premium, and option strike price decrease.

Suggested Citation

  • Tong Shu & Fang Yang & Shou Chen & Shouyang Wang & Kin Keung Lai & Lu Gan, 2015. "Contract Coordination in Dual Sourcing Supply Chain under Supply Disruption Risk," Mathematical Problems in Engineering, Hindawi, vol. 2015, pages 1-10, October.
    • Handle: RePEc:hin:jnlmpe:473212
    DOI: 10.1155/2015/473212
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    Cited by:

    1. Ghoudi, Kilani & Hamdouch, Younes & Boulaksil, Youssef & Hamdan, Sadeque, 2024. "Supply chain coordination in a dual sourcing system under the Tailored Base-Surge policy," European Journal of Operational Research, Elsevier, vol. 317(2), pages 533-549.

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