Dynamic compensation and contingent sourcing strategies for supply disruption

Li, Shanshan; He, Yong; Minner, Stefan

doi:10.1080/00207543.2020.1840643

Cited by 27 publications

(11 citation statements)

References 46 publications

(38 reference statements)

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“…A fruitful of strategies have been proposed to hedge against supply-side disruptions, such as proactive strategies utilized before the occurrence of disruptions, reactive mitigation and recovery strategies to be implemented during and after disruption [16][17][18][19].…”

Section: Supply-side Disruption Management Of Perishable Product Supply Chainmentioning

confidence: 99%

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Strategic rationing and freshness keeping of perishable products under transportation disruptions and demand learning

Salling

2021

Complex Intell. Syst.

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This paper considers a retailer who sells perishable fresh products directly to customers through an online channel and encounters a transportation disruption. Products shipped during the disruption period come with an uncontrollable delivery lead time, resulting in product quality degradation. To balance the compensation price provided to customers because of quality losses, the retailer might employ freshness-keeping efforts to reduce the quality loss during transportation. Therefore, it raises several fundamental questions for the retailer in mitigating the disruption. Is it always optimal to satisfy those customers who are willing to purchase during disruption? If it is profitable to fulfill orders along with an extra delivery lead time, and with a quality loss compensation, what is the optimal freshness-keeping effort? If it is preferable to deliberately create unsatisfied demand by announcing shortages (rationing) to customers, when is the optimal time to do so? To answer these questions, we first present the dynamics of post-disruption inventory and demand, taking into account the demand learning effect facilitated from negative word-of-mouth during disruption and the demand recovery after disruption ends. Afterward, we develop a model to achieve the optimal selling strategy for maximizing post-disruption profit, identifying the joint decision of the rationing period and freshness-keeping effort. Finally, by numerical analysis, three types of selling strategies are visually provided to hedge against disruptions of different lengths.

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Section: Supply-side Disruption Management Of Perishable Product Supply Chainmentioning

confidence: 99%

“…Next, by comparing Π D&N| |u * =1 with Π D&N| |u * =0 , we see that Equation (19) indicates that the optimal decision is u * = 1 if 1 − e −kT L p − c f T L > 0 and u * = 0 otherwise.…”

Section: Appendixmentioning

confidence: 99%

Strategic rationing and freshness keeping of perishable products under transportation disruptions and demand learning

Salling

2021

Complex Intell. Syst.

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“…The objective function (4) maximizes the customers' expected utility. Equation (5) guarantees that the inventory held by customers is entirely depleted at the end of the disruption, i.e., I C (t) = 0 if t = E(T) . Equation ( 6) ensures the non-negativity of customers' purchase quantity.…”

Section: Customers' Stockpiling Behavior During Disruptionmentioning

confidence: 99%

“…To hedge against the negative impacts, the manufacturer employs a supply-side contingent sourcing. Sufficient surveys have pointed out that contingent sourcing is a widely utilized emergency countermeasure in practical [ 5 ]. Several essential research questions arise accordingly: driven by the fear that price will continue growing during the shortage, how do the consumers dynamically adjust their purchasing behavior?…”

Section: Introductionmentioning

confidence: 99%

Dynamic sourcing strategies for supply disruptions under consumer stockpiling

Zhou

2021

Complex Intell. Syst.

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This paper considers a make-to-order system where production gets disrupted due to a random supply failure. To avoid potential stock-out risk and responding price increase during disruption, customers might decide to stockpile extra units for future consumption. We investigate the contingent sourcing strategy for the manufacturer to cope with the disruption. To this end, we first discuss the optimal post-disruption stockpiling decision for customers. In view of expected disruption duration, price rise, and inventory holding cost, three types of stockpiling behavior are analytically provided for the customers: non-stockpiling, gradual stockpiling, and instantaneous stockpiling. Next, a model is formulated to optimize the joint decision of contingent sourcing time and quantity, with the objective of maximizing profit expectation. Finally, by conducting numerical analysis, we generate further insights into the role of relative factors and provide specific managerial suggestions on how to adapt dynamic contingent sourcing strategies to alleviate different disruptions, under different market environments and customer behaviors.

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“…Terefore, while ensuring sufcient emergency materials reserve, how to determine the optimal amount of emergency materials reserve, reduce emergency materials waste, and avoid the problem of overdue emergency materials occupying inventory has become a new challenge for government organizations to purchase and store emergency materials. As a result, based on the option contract, many scholars have established an emergency procurement model considering the reserve period, so as to optimize the emergency materials reserve mechanism [11][12][13][14].…”

Section: Introductionmentioning

confidence: 99%

Dual‐Source Procurement Strategies of Emergency Materials Considering Risk Attitudes

Yan

2022

Discrete Dynamics in Nature and Society

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The uncertainty of emergencies makes the emergency procurement face many risks, so the risk management is particularly important of the emergency procurement. The risk attitude of decision makers will significantly affect the decision-making of risk management. In this paper, the risk management problem with different risk attitudes of emergency procurement consisting of dual-source suppliers and the single government is studied, and a government-led Stackelberg game is used to analyze the risks of each link to establish an emergency procurement model under the option contract, and the optimal decision-making is obtained. The effects of reserve period, risk avoidance coefficient, and probability of emergency on optimal decision-making are analyzed with different risk attitude. Moreover, we investigate the coordination of the government-led supply chain coordination under the risk aversion and risk-neutral conditions of emergency supply chain participants. The results show that the model can control the risk while reducing the cost of government procurement and ensuring the revenue of suppliers. Finally, the influence of each parameter on the optimization decision is verified by a numerical example.

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Dynamic compensation and contingent sourcing strategies for supply disruption

Cited by 27 publications

References 46 publications

Strategic rationing and freshness keeping of perishable products under transportation disruptions and demand learning

Strategic rationing and freshness keeping of perishable products under transportation disruptions and demand learning

Dynamic sourcing strategies for supply disruptions under consumer stockpiling

Dual‐Source Procurement Strategies of Emergency Materials Considering Risk Attitudes

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