Allocational flexibility in constrained supply chains

Navid Sabbaghi, Yossi Sheffi and John N. Tsitsiklis

International Journal of Production Economics, 2014, vol. 153, issue C, 86-94

Abstract: We show that when a one-supplier/one-newsvendor supply chain is capacity-constrained, wholesale price contracts have some flexibility in allocating the channel-optimal profit. We analyze how this flexibility changes as we change the supply chain׳s capacity constraint and market demand. We also explore the allocation that is achieved in equilibrium in a newsvendor procurement game. Finally, we generalize our results to risk-sharing contracts and show that those contracts also gain additional flexibility in allocating the channel-optimal profit.

Keywords: Capacity constraint; Allocational flexibility; Supply contracts (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:proeco:v:153:y:2014:i:c:p:86-94

DOI: 10.1016/j.ijpe.2014.01.014

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