Lot‐sizing model with advance payment pricing and disruption in supply under planned partial backordering

We study a financing problem in a supply chain (SC) consisting of one supplier and one buyer under supply disruption. The supplier could face a disruption at its end which could effectively reduce its yield in case of disruption, thereby resulting in supply yield uncertainty. The retailer can finance the supplier using advance selling that can help mitigate the impact of disruption. We model this problem as a Stackelberg game, where the supplier as the leader announces the wholesale price and the retailer responds by deciding its optimal order quantity given stochastic demand and an exogenous fixed retail price. The supplier then commences production and a disruption can happen with a known probability. We assume that under disruption the quantity delivered is a fraction of the initial quantity ordered by the retailer. The retailer loses any unmet demand. We analyze three different scenarios of the Stackelberg game, namely no advance selling with disruption, advance selling without disruption, and advance selling with disruption. Our results indicate that advance selling can be used to mitigate the impact of supply disruption and at the same time could lead to an increase in the overall SC profit.

“…Our work is closely related to a study by Taleizadeh (). They developed a lot‐sizing model for a retailer with advance selling and supply disruption with partial backordering.…”

Section: Introductionsupporting

confidence: 55%

Section: Introductionmentioning

confidence: 99%

Supply chain financing with advance selling under disruption

Gupta

Chutani

2019

“…Several studies have assumed partial backlogging; the recent works among these include Giri et al. (), Tsao (), Drake and Pentico (), Sarkar and Sarkar (), and Taleizadeh (). A majority of studies deal with partial backlogging from the perspective of business‐to‐business delivery.…”

Section: Review Of the Literaturementioning

confidence: 99%

Effects of customer response to fashion product stockout on holding costs, order sizes, and profitability in omnichannel retailing

Ovezmyradov

Kurata

2018

In retailing practice, customers may actively respond in one of the following ways after experiencing stockout of a preferred brand: switch to a substitutable brand, switch to another store (where the preferred brand could be available), or delay purchase (backlogging). This paper presents a model of active customer responses to stockout of fashion products. In the single-period model, a retailer maximizes profit by selling two substitutable brands through two different stores. Analytical results and numerical experiments suggest that active response to stockout increase the retailer's profitability due to (a) additional revenue from backlogging and brand and store switching and (b) decrease in optimal order size resulting in lower holding costs. Omnichannel fulfillment offers additional opportunities for retailers to benefit from active responses to stockout.

“…MC usually creates a challenge for companies that have to make additional investments to support customization (Wind and Rangaswamy, ) and this would lead to finance constraint and therefore, the financial problems in MC supply chain deserves more exploration. Taleizadeh () explores the lot‐sizing model with advance payment pricing and disruption in supply under planned partial backordering. Xiao and Zhang () examine optimal mixed financing strategy of the manufacturers under the preordering contract and a bidirectional compensation contract.…”

Section: Literature Reviewmentioning

confidence: 99%

Influences of supply chain finance on the mass customization program: risk attitudes and cash flow shortage

Guo

Liu

2019

In recent years, to satisfy diversified customer needs in the target market, an increasing number of brands have launched mass customization (MC) programs as one of their core operations strategies. The production process flexibility and personalization degree of customized products (i.e., the MC products) have thus become key to the success of MC schemes. In the meantime, however, considering the high market uncertainty in consumer preferences and the challenges from the production process, there are plenty of risks in MC operations. Hence, in this paper we develop a game-theoretic model consisting of an MC brand and an upstream manufacturer to identify the influences of supply chain finance (SCF) on MC programs. The influences brought by the risk attitudes of both MC brand and manufacturer are analyzed. Besides, an extra interest rate for raising the working capital for production (e.g., from the bank) at the manufacturing level is also considered in this paper to address the impact of cash flow shortage. We find that when the positive sensitivity of the market demand with respect to the modularity level of the MC product is sufficiently high, the optimal product modularity level of the MC product increases with the MC brand's degree of risk averse. In addition, it can also be observed that when both the market demand's positive sensitivity to the modularity level of the MC product and the MC brand's opportunity cost rate for placing the advance order are sufficiently high, any increase in the risk-averse degree of the MC brand or the manufacturer will lower the manufacturer's optimal wholesale price of the MC product as well as the MC brand's optimal rate of the advance order. Furthermore, the higher the interest that the manufacturer needs to pay (such as to the bank) for raising the working capital for the MC production process, the lower the optimal wholesale price of each finished MC product will be to help the manufacturer raise more money through the advance order placed by the MC brand. These observations complete the findings in the extant literature and provide important managerial insights into managing MC operations.