research-article

Supply chain coordination with dual procurement sources via real-option contract

Authors:

C.L. Johnny Wan,

Ping JiAuthors Info & Claims

Computers and Industrial Engineering, Volume 80, Issue C

Pages 274 - 283

https://doi.org/10.1016/j.cie.2014.12.019

Published: 01 February 2015 Publication History

Abstract

We explore the manufacturer's optimal procurement strategy under stochastic demand.The manufacturer purchases from the supplier and the existing spot markets.The manufacturer maneuvers the real-option to coordinate the supply chain.Effects of risks in the spot market on market equilibrium are derived. In a two-stage supply chain with a supplier and a manufacturer, the manufacturer can purchase a product either from the supplier or in the spot market. The spot market, however, inevitably involves price fluctuation risk and supply risk. Assuming that the manufacturer is the leader in a procurement game and offers a real-option contract to the supplier, we study the manufacturer's optimal mixed procurement strategy that integrates the use of the real-option contract and the spot market. Moreover, we analyze the effects of the price risk and the supply risk in the spot market on market equilibrium. We show that using the real-option contract mechanism improves the overall expected profit of a supply chain and guarantees supply chain coordination in the presence of the spot market. The results also demonstrate that the price risk and the supply risk in the spot market adversely affect the manufacturer's expected profit. On the contrary, these two risks bring benefits to the supplier.

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Cited By

Kuntian MJiangtao MJuanjuan LChongchong P(2017)Coordination of Supply Chain with Fairness Concern Retailer Based on wholesale price and option ContractProceedings of the 2017 International Conference on Management Engineering, Software Engineering and Service Sciences10.1145/3034950.3034994(225-230)Online publication date: 14-Jan-2017
https://dl.acm.org/doi/10.1145/3034950.3034994

Supply chain coordination with dual procurement sources via real-option contract
1. Applied computing
  1. Enterprise computing
  2. Law, social and behavioral sciences

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Published In

cover image Computers and Industrial Engineering

Computers and Industrial Engineering Volume 80, Issue C

February 2015

296 pages

ISSN:0360-8352

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Copyright © Elsevier Ltd.

Publisher

Pergamon Press, Inc.

United States

Publication History

Published: 01 February 2015

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Cited By

Kuntian MJiangtao MJuanjuan LChongchong P(2017)Coordination of Supply Chain with Fairness Concern Retailer Based on wholesale price and option ContractProceedings of the 2017 International Conference on Management Engineering, Software Engineering and Service Sciences10.1145/3034950.3034994(225-230)Online publication date: 14-Jan-2017
https://dl.acm.org/doi/10.1145/3034950.3034994

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