Buyback and risk-sharing contracts to mitigate the supply and demand disruption risks

Rita Maria Difrancesco, Purushottam Meena and Rajendra Tibrewala

European Journal of Industrial Engineering, 2021, vol. 15, issue 4, 550-581

Abstract: Events like the recent COVID-19 create major disruptions in global supply chains. Companies find it difficult to manage business continuity under supply uncertainties and disruptions. This paper investigates the buyer's optimal ordering decisions under stochastic demand, supply uncertainty, and disruption risks. We consider a two-echelon supply chain consisting of a single buyer and two suppliers. The main supplier is cheaper, but exposed to the risks of random yield and disruption. The backup supplier is perfectly reliable, but relatively expensive. An analytical model is developed using contract-based mechanisms considering the risks of demand uncertainty, supply disruption, and random yield. Two typologies of contracts with suppliers are considered, namely, risks sharing contract and buyback contract. A numerical study is performed to explore the effects of different parameters on the supply chain members' profits, providing guidelines for managers regarding how the supply chain's risks and demand uncertainty influence the ordering decisions. [Received: 5 November 2019; Accepted: 22 August 2020]

Keywords: supply disruption; COVID-19; random yield; demand uncertainty; buyback contract; ordering policy; risk-sharing contracts. (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.inderscience.com/link.php?id=116140 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ids:eujine:v:15:y:2021:i:4:p:550-581

Access Statistics for this article

More articles in European Journal of Industrial Engineering from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().