Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand

Based on two substitute products, we study the inventory and contract coordination strategy of a three-echelon supply chain, which consists of two suppliers, a manufacturer and a retailer, under supply disruption and stochastic demand. We investigate the channel gross profit model of the centralized...

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Main Authors:	Rongfang Yan, Bin Lu, Jianjun Wu
Format:	Article
Language:	English
Published:	MDPI AG 2016-07-01
Series:	Sustainability
Subjects:	multi-echelon substitute products buy-back contract supply disruption coordination
Online Access:	http://www.mdpi.com/2071-1050/8/7/676

id	doaj-4e0b6d81d8774040aa83f7b7b86aff39
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spelling	doaj-4e0b6d81d8774040aa83f7b7b86aff392020-11-25T00:50:42ZengMDPI AGSustainability2071-10502016-07-018767610.3390/su8070676su8070676Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic DemandRongfang Yan0Bin Lu1Jianjun Wu2College of Mathematics and Statistics, Northwest Normal University, Lanzhou 730070, Gansu, ChinaCollege of Mathematics and Statistics, Northwest Normal University, Lanzhou 730070, Gansu, ChinaCollege of Mathematics and Statistics, Northwest Normal University, Lanzhou 730070, Gansu, ChinaBased on two substitute products, we study the inventory and contract coordination strategy of a three-echelon supply chain, which consists of two suppliers, a manufacturer and a retailer, under supply disruption and stochastic demand. We investigate the channel gross profit model of the centralized supply chain and obtain a unique optimal order quantity. Under a decentralized decision, we find that the commonly-used wholesale price contracts cannot coordinate the system. Then, we propose a buy-back contract and prove that this contract can more efficiently coordinate the system than the former. At last, we show that the integrated performance of the decentralized system can be maximized through choosing the buy-back parameter by the manufacturer and reveal that the effects of supply uncertainty and the substitution behavior of customers on the optimal decision by numerical examples.http://www.mdpi.com/2071-1050/8/7/676multi-echelonsubstitute productsbuy-back contractsupply disruptioncoordination
collection	DOAJ
language	English
format	Article
sources	DOAJ
author	Rongfang Yan Bin Lu Jianjun Wu
spellingShingle	Rongfang Yan Bin Lu Jianjun Wu Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand Sustainability multi-echelon substitute products buy-back contract supply disruption coordination
author_facet	Rongfang Yan Bin Lu Jianjun Wu
author_sort	Rongfang Yan
title	Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand
title_short	Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand
title_full	Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand
title_fullStr	Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand
title_full_unstemmed	Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand
title_sort	contract coordination strategy of supply chain with substitution under supply disruption and stochastic demand
publisher	MDPI AG
series	Sustainability
issn	2071-1050
publishDate	2016-07-01
description	Based on two substitute products, we study the inventory and contract coordination strategy of a three-echelon supply chain, which consists of two suppliers, a manufacturer and a retailer, under supply disruption and stochastic demand. We investigate the channel gross profit model of the centralized supply chain and obtain a unique optimal order quantity. Under a decentralized decision, we find that the commonly-used wholesale price contracts cannot coordinate the system. Then, we propose a buy-back contract and prove that this contract can more efficiently coordinate the system than the former. At last, we show that the integrated performance of the decentralized system can be maximized through choosing the buy-back parameter by the manufacturer and reveal that the effects of supply uncertainty and the substitution behavior of customers on the optimal decision by numerical examples.
topic	multi-echelon substitute products buy-back contract supply disruption coordination
url	http://www.mdpi.com/2071-1050/8/7/676
work_keys_str_mv	AT rongfangyan contractcoordinationstrategyofsupplychainwithsubstitutionundersupplydisruptionandstochasticdemand AT binlu contractcoordinationstrategyofsupplychainwithsubstitutionundersupplydisruptionandstochasticdemand AT jianjunwu contractcoordinationstrategyofsupplychainwithsubstitutionundersupplydisruptionandstochasticdemand
_version_	1725247096623202304

Contract Coordination Strategy of Supply Chain with Substitution under Supply Disruption and Stochastic Demand

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