Coordination of supply chains with a flexible ordering policy under yield and demand uncertainty

Fei Hu, Cheng-Chew Lim and Zudi Lu

International Journal of Production Economics, 2013, vol. 146, issue 2, 686-693

Abstract: This paper studies a flexible ordering policy among a manufacturer and a supplier with random yield and demand uncertainty, where the order quantity lies between the minimum and the maximum quantity. We first determine the optimal flexible ordering policy and the corresponding raw material production quantity that maximize expected profit of the centralized supply chain, and find that our flexible ordering policy can significantly enhance the supply chain's expected profit compared to an invariable ordering policy. Then we analyze the decentralized scenario and propose a revenue sharing policy with an order penalty and rebate (OPR) contract to fully coordinate the supply chain. Finally, numerical examples are given to illustrate the results.

Keywords: Supply chain coordination; Flexible ordering policy; Combined contract; Uncertainty (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:146:y:2013:i:2:p:686-693

DOI: 10.1016/j.ijpe.2013.08.024

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