Optimal production and procurement decisions in a supply chain with an option contract and partial backordering under uncertainties

Fei Hu, Cheng-Chew Lim and Zudi Lu

Applied Mathematics and Computation, 2014, vol. 232, issue C, 1225-1234

Abstract: This paper considers a decentralized supply chain including one retailer and one manufacturer, where the manufacturer’s production yield and the retailer’s demand are both stochastic. At the beginning of the selling season, the retailer places an order and purchases an option contract with the manufacturer. After the selling season, the excess demand is partially backordered, and the retailer exercises his option order and then place an instant order for the backorders. The optimal ordering policy for the retailer and the corresponding production decision for the manufacturer are studied. Numerical examples are carried out to show the impact of the model parameters on the optimal policies.

Keywords: Supply chain; Option contract; Partial backorders; Uncertainty; Optimal ordering policy (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:apmaco:v:232:y:2014:i:c:p:1225-1234

DOI: 10.1016/j.amc.2014.01.149

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