A Swap-Integrated Procurement Model for Supply Chains: Coordinating with Long-Term Wholesale Contracts

Min-Yeong Ryu and Pyung-Hoi Koo ()
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Min-Yeong Ryu: Department of Industrial and Data Engineering, Pukyong National University, Busan 48513, Republic of Korea
Pyung-Hoi Koo: Department of Systems Management and Safety Engineering, Pukyong National University, Busan 48513, Republic of Korea

Mathematics, 2025, vol. 13, issue 15, 1-19

Abstract: In today’s volatile supply chain environment, organizations require flexible and collaborative procurement strategies. Swap contracts, originally developed as financial instruments, have recently been adopted to address inventory imbalances—such as the 2021 COVID-19 vaccine swap between South Korea and Israel. Despite its increasing adoption in the real world, theoretical studies on swap-based procurement remain limited. This study proposes an integrated model that combines buyer-to-buyer swap agreements with long-term wholesale contracts under demand uncertainty. The model quantifies the expected swap quantity between parties and embeds it into the profit function to derive optimal order quantities. Numerical experiments are conducted to compare the performance of the proposed strategy with that of a baseline wholesale contract. Sensitivity analyses are performed on key parameters, including demand asymmetry and swap prices. The numerical analysis indicates that the swap-integrated procurement strategy consistently outperforms procurement based on long-term wholesale contracts. Moreover, the results reveal that under the swap-integrated strategy, the optimal order quantity must be adjusted—either increased or decreased—depending on the demand scale of the counterpart and the specified swap price, deviating from the optimal quantity under traditional long-term contracts. These findings highlight the potential of swap-integrated procurement strategies as practical coordination mechanisms across both private and public sectors, offering strategic value in contexts such as vaccine distribution, fresh produce, and other critical products.

Keywords: procurement strategy; swap contract; demand uncertainty; inventory coordination; supply chain risk management (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2025
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