Mitigating supply risk: an approach with quantity flexibility procurement

Collection Location Koleksi E-book & E-Journal Perpustakaan Pusat Unila
Edition vol.271issue 2
Call Number
ISBN/ISSN 15729338
Author(s) Bo He
Yange Yang
Subject(s) Business and Management
Classification NONE
Series Title
GMD E-Journal
Language English
Publisher Springer
Publishing Year 2018
Publishing Place Switzerland
Collation
Abstract/Notes Abstract This paper considers a buyer that procures from its major supplier whose productionissubjecttorandomyieldrisk.Tomitigatesupplyrisk,thebuyercanprocurefromanother reliable supplier who provides quantity flexibility (QF) contract. Under both deterministic and stochastic demand, we study the buyer’s optimal procurement decisions. We analyze the structural properties of optimal solutions and identify the conditions under which the quantityflexibility procurementpolicyshouldbeused.Wealsoexaminetheeffectofsupply risk, flexibility, wholesale price and demand risk on the procurement decisions. We find that the higher supply risk and demand risk reduce the buyer’s profit but have different impact on the buyer’s order policy. For the QF supplier, it may not obtain more orders by providing larger flexibility to the buyer, on the contrary, doing this may benefit the risky supplier. For the QF supplier or risky supplier, given its competitor’s wholesale price, it can increase its order share by lower wholesale price. Keywords Random yield·Dual-sourcing·Quantity flexibility·Supply chain
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