Solutions for flexible container leasing contracts with options under capacity and order constraints

Int Trans Operational Res

2017

This paper considers a supply chain consisting of a supplier who manufactures one type of perishable products characterized by a long lead time and a retailer who purchases the products from the supplier and sells them to end consumers. In order to hedge against the risks of price and demand caused by inflation, portfolio contracts with put options, namely, a combination of wholesale price contracts and put option contracts, are adopted by the retailer to obtain the products from the supplier. We characterize the optimal ordering and production policies for the retailer and the supplier in the presence of put option contracts under inflation. By comparing with the case without put option contracts, we discuss the effect of put option contracts on the supply chain and prove that the usage of put option contracts benefits these two members under inflation. Through several numerical examples, we illustrate the effect of inflation on the supply chain with and without put option contracts. On this basis, we design a feasible supply chain coordination strategy based on put option contracts under inflation.

Section: Introductionmentioning

confidence: 99%

The role of put option contracts in supply chain management under inflation

Wan

Int Trans Operational Res

2017

“…In recent years, there are a few existing literature sources relative to different option contracts simultaneously. Liu et al [43] analyze the optimal solution for the carrier with call, put, and bidirectional option contracts and then discuss the application strategies of different option contract. Nosoohi and Nookabadi [44] consider the outsourcing decisions with call, put, and bidirectional option contracts for the manufacturer who faces stochastic finial processing cost.…”

Section: Literature Reviewmentioning

confidence: 99%

Multiperiod Production and Ordering Policies for a Retailer-Led Supply Chain through Option Contracts

Wan

Mathematical Problems in Engineering

2018

This paper formulates two groups of multiperiod production and ordering models with call and bidirectional option contracts for a two-party supply chain consisting of one followed supplier and one dominant retailer, respectively. Based on dynamic programming theory, we characterize the optimal policy structures for two partners in each period. We also provide an approximation for the corresponding policy parameters evaluation in two cases. Then, we investigate the impacts of different option contracts and the demand risk on the decisions and performances of two members. Our results suggest that, whether concerning call or bidirectional option contracts, the optimal policies for two members always follow a base stock type. When the price parameters are the same for different option contracts, the service levels of both the system and the retailer are higher with call option contracts than with bidirectional ones, whereas the retailer's inventory risk is lower with bidirectional option contracts than with call ones. Under the same conditions stated above, call option contracts can always benefit the supplier, but not the retailer. Owing to the retailer's dominant position, call option contracts are better choice for the supply chain if the option (exercise) price is low (high), while bidirectional option contracts are more suitable choice for the supply chain if the option (exercise) price is high (low). In addition, an increase in the demand risk would prompt the supplier to increase his production quantity and the retailer to reduce the initial firm order quantity, either with call or bidirectional option contracts.

“…Zhao (2010) [23] applies option contracts in a supply chain consisting of one farmer and one processing enterprise, and proves that option contracts can coordinate agricultural supply chains and benefit the farmer. Liu et al (2013) [16] use option contracts in a two-stage container leasing service supply chain, and draw a conclusion that profits of both the container owner and the rental can be enhanced.…”

Section: Literature Reviewmentioning

confidence: 99%

<b>Status and Problem Analysis of Da-industrial Salt Supply Chains in China </b>

Wang

2015

iscm

: The traditional da-industrial salt supply chains in China cannot match supply and demand very well because of demand uncertainty, which causes huge losses to salt making enterprises and also influences the performance of the whole supply chain. How to deal with the demand uncertainty to improve the performance of the supply chain is an important subject for the da-industrial salt supply chain. In this paper, we introduce the traditional da-industrial salt supply chains in China and analyse the main problems in the operation mode as follows. One problem is that the traditional operations mode in da-industrial salt supply chains impacts the performance of the whole supply chain. The other one is that the high demand uncertainty brings damage and huge losses to the supply chain. To solve these problems, we propose supply contracts with options in da-industrial salt supply chains in China. Purchasing options enables the salt using enterprise to gain flexibility in the order decision-making, and to reduce forecasting error by further collecting demand information. For the salt making enterprise, she can be compensated from the revenue obtained from the options.