Supply chain coordination with trade credit under the CVaR criterion

Trade credit is a popular payment method in the supply chain. However, it may transfer the market risk facing by the retailer to the manufacturer in the form of default risk. To reduce the default loss, we set up a modified newsvendor model incorporating random default probability. Under the goal of loss minimisation, the manufacturer’s optimal production quantity is derived with the criterion of conditional value at risk, and compared with the retailer’s optimal order quantity. It is found that, compared with traditional newsvendor setting, the setting of default possibility in trade credit can increase the order quantity but decrease the production quantity. If the risk aversion level and gross profit of product are low, the manufacturer may deliver below the quantity ordered. Although the default loss can be reduced by cutting order, the profits of both agents decrease, thereby leading to a deviation from the supply chain coordination. Trade credit coordinating the supply chain requires an extremely long credit period, which is not feasible. Moreover, quantity discount contract is able to improve the retailer’s order quantity, but insufficient to achieve coordination, which also depends on the manufacturer’s risk aversion level.     

Designing a supply chain network for deteriorating inventory under preservation effort and trade credits

When designing a perishable goods supply chain network under trade credit arrangements, distribution companies must contend with deteriorating inventory and product preservation efforts to maximise profits. Key decisions include locating distribution centres (DCs), assigning retail stores to DCs, joint replenishment cycle time and investing in preservation technology. This paper addresses these factors from the position that as preservation effort increases, preservation technology cost increases and deterioration rate decreases. An algorithm based on piecewise nonlinear optimisation is provided for solving supply chain network design problems efficiently. In contrast to other studies that have used the approximation approach, the proposed approach solves the original problem accurately and efficiently. Numerical studies are conducted to demonstrate the solutions procedures and determine the effects of the parameters on decisions and profits. The results of this study and the proposed modelling approach are useful references for managerial decisions in designing a supply chain network the context of trade credit and inventory deterioration.     

Supply chain coordination under information asymmetry: a review

Aligning supply chain decisions of separate entities with independent objectives can be considered to be one of the difficulties of supply chain management. This difficulty becomes worse if the supply chains are characterised by an asymmetrical distribution of information. Although considerable research has recently been devoted to supply chain coordination, less attention has been paid to different information asymmetry settings to the mechanisms underlying it. This research attempts to help fill this gap by reviewing and classifying the literature based on supply chain features, applied methodology, coordination mechanisms, and types of information asymmetry. The proposed classification is used to highlight the ongoing issues in the area and identify the direction for future research.     

促销努力竞争情形下双渠道供应链协调策略

研究需求依赖于促销努力水平下的供应链优化协调问题。分别建立了集中式供应链和分散式供应链两种模型,在分散式模型中,发现批发价格契约不能协调该双渠道供应链,而改进的批发价格契约可以协调该双渠道供应链。然后分别研究了制造商促销努力系数、零售商促销努力系数,以及顾客对直销渠道的接受度对供应链绩效的影响,并且进行了相关的算例分析,给出相应的管理意义。     

The value of trade credit with rebate contract in a capital-constrained supply chain

We investigate the value of an innovative trade credit with rebate contract (TCRC) model in a stylised supply chain. In this supply chain, the capital-abundant manufacturer offers an integrated contract involving trade credit, minimum ordering and sales rebate contract to a capital-constrained retailer. To highlight the value of the TCRC model, we compare it with a traditional trade credit financing (TTCF) model in a ‘selling to the newsvendor model’. First, we show that equilibrium strategies exist between the manufacturer and the retailer under the TCRC or TTCF model. Second, this study investigates equilibrium selection between the TCRC and TTCF models for the individual and the supply chain. Finally, we show the manufacturer’s pricing policy, wherein the TCRC model outperforms the TTCF model for the players. Furthermore, we conduct a set of numerical experiments to show evidence for theoretical analysis and measure the operation efficiency of the TCRC model for players in the supply chain.     

Supply chain coordination with two-part tariffs under information asymmetry

Supply chain coordination literature indicates that two-part tariff contracts cannot coordinate a supply chain with a supplier and a retailer under information asymmetry, but can coordinate the channel under full information, while leaving the retailer zero profit. Motivated by the practice of Costco Business Centres, we incorporate customer heterogeneity, near-saturated retail market and asymmetric information into a stylised model. The retailer has the knowledge of customer heterogeneity while the supplier does not. The supplier, on the other hand, designs a menu of two-part tariffs for the retailer to choose from. We have found that two-part tariffs can coordinate the supply chain under asymmetric information, while leaving the retailer a positive profit. In addition, a one-size-fits-all two-part tariff can coordinate the supply chain at equilibrium, i.e. there is no need for the supplier to design different two-part tariffs for the retailer who may possess different types of information.     

Optimal process mean and quality improvement in a supply chain model with two-part trade credit based on Taguchi loss function

The two-part trade credit policy is developed to accelerate cash inflow that can avoid bad debt risk in the earlier economic order quantity (EOQ) models allowing only one period of time for delay in payment. Taguchi loss function has proved to be a more realistic function for fitting the actual quality loss cost in economic product quantity (EPQ) model. To minimise quality loss, optimal process mean setting shifts process mean to balance the cost outside the specification limits, quality improvement applies investment to reduce process variation. Supply chain integration has been proved that it can be used to minimise the entire cost more effectively than independent EOQ or EPQ models. This paper improves the earlier studies by incorporating the above research topics that have not been simultaneously discussed before, develops a supply chain model based on the Taguchi loss function, which combines the trade strategy from the retailer’s perspective and the quality adjustments from the supplier’s perspective to maximise total supply chain profit. We find that the trade credit terms definitely affect suppliers and retailers’ optimal decisions, and numerical examples can provide decision references for supply chain managers to set a trade credit policy and control quality.     

Optimisation of online retailer pricing and carrier capacity expansion during low-price promotions with coordination of a decentralised supply chain

In recent years, many online retailers in China set low prices on 11 November, which stimulates huge delivery demand and results in many problems although carriers make an effort to increase their delivery capacities temporarily. To circumvent this difficulty, we consider a supply chain consisting of an online retailer, who can set price to influence the demand, and a capacitated carrier, whose capacity can be expanded at a high cost. We derive the optimal decisions in the centralised and decentralised decision systems, and compare the performances of the two systems. We find that the optimal decisions, and which system has lower price, larger capacity increment, and more late delivered goods depends on the model parameters (the market scale, the late delivery costs, the capacity expansion cost, the delivery fee, and the demand uncertainty). Specially, we show that, contrary to the traditional channel, the online retailer in the decentralised system may set lower price and the carrier has less incentive to expand capacity in the decentralised system in some situations, which underlines the need for coordination. In addition, we propose coordination contracts to improve the overall performance of the supply chain under deterministic and random demands.     

Supplier credit guarantee loan in supply chain with financial constraint and bargaining

This paper adopts a multiunit bilateral bargaining framework on financial decision. In a two-echelon supply chain, the supplier sells products through a financial constraint retailer. If needed, the retailer gets a short-term financing from a bank by supplier credit guarantee loan (CGL). Through applying the Nash bargaining framework, we formulate two-level game models, i.e. Retailer-Supply System negotiation and Supplier-Bank negotiation. In this paper, we study and discuss the equilibrium order quantity which is affected by initial working capital and interest rate, the retailer-supply system negotiation and upstream wholesale price effects for supply chain performance, the supplier-bank negotiation and interest rate decisions with different capital markets. The results show: (i) there exists loan size limit for financial constraint retailer under CGL. (ii) The upstream wholesale price increase will weaken retailer’s bargaining position, and the supply system may gain or lose depending on the bargaining power. (iii) There exists unique equilibrium sharing ratio in supply system, which means CGL can achieve risk sharing. (iv) Within a supply system, the upstream wholesale price advantage will weaken bank’s profit, whereas supplier may gain or lose depending on his bargaining power.     

商业信用-广告合作的供应链两部定价契约协调

在一个制造商和一个零售商构成的供应链中,考虑制造商以提供商业信用、零售商以广告形式进行的合作对制造商制定批发价格的影响,通过纵向整合分析、Nash均衡分析与Stackelberg均衡分析,阐明两部定价契约在供应链协调及收益分配方面的作用,确定了实现供应链协调的契约参数与条件。最后通过数值算例说明了所得结论。     

Supply chain risk classification: discussion and proposal

The supply chain management philosophy has often been used by organisations to achieve a competitive advantage, but it increases the vulnerability of these supply chains (SC) to certain risks. This dialogue between competitive advantage and risk generation has increased the number of studies related to the topic of ‘supply chain risk management’. Aiming to contribute to this field of research, a literature survey was conducted on 16 risk classifications, which included 56 risk types. These risk types were sorted according to existing conceptual similarities and then related to the five management processes intrinsic in a functional SC (plan, source, make, deliver and return), which are mainly advocated by the supply chain operations reference model. This literature review also highlights the lack of consensus among the surveyed authors concerning the risk types that affect a SC, a gap which this paper seeks to close by proposing a supply chain risk classification.     

考虑零售商延期付款的供应链协调机制研究

在由一个供应商和一个零售商组成的两级供应链中,供应商允许零售商进行延期付款,研究了零售商所采取的单期订购决策及供应链协调问题.研究表明,允许零售商延期付款的斯塔克博格模型存在角点解均衡,供应商会占有所有供应链利润.分析得出了允许零售商延期付款的订购合同优于批发价格合同的条件以及供应链达到整体协调的条件.最后还研究了供应商提供零利率延期付款的合同,得出了供应商提供零利率延期付款的合同所实现的供应链利润优于允许零售商延期付款的斯塔克博格模型合同的条件.研究表明通过延期付款,供应商和零售商可以设计一个线性转移支付实现供应链效率的提升以及供应链协调.     

Contract negotiation and risk preferences in dual-channel supply chain coordination

This study employs profit-sharing contracts to coordinate dual-channel supply chains and examines the selection of profit-sharing parameters and the allocation of extra system profit gained from coordination. We characterise the Pareto-optimal contracts for the two- and three-stage dual-channel supply chains, by developing and maximising system utility function related to risk preferences and negotiating power. Under the optimal profit-sharing parameter in a two-stage supply chain, both members are reluctant to cooperate; however, in a three-stage supply chain, under the optimal two profit-sharing parameters selected by optimising the system utility function, the retailer is always reluctant to cooperate, but the distributor or the supplier may have incentives to deviate from cooperation. In this case, the distributor and the supplier will negotiate again as in a two-stage supply chain so that all three members can benefit from coordination with profit-sharing contracts. Besides acting independently, the distributor, in the process of contract negotiation, may choose to form an alliance with the upstream supplier or the downstream retailer, which means the relationship among the three members involving profit allocation after coordination is quite different from that for a two-stage supply chain and is not necessarily interest-contrary. In the contract negotiation, in any kind of scenario, risk aversion and negotiation power have a significant impact on the selection of optimal profit-sharing parameters and the allocation of extra system profit. One member’s risk aversion or its negotiation power may be advantageous to the other. Mathematical examples are illustrated to clarify the contract negotiation process.     

基于双边拍卖模型的易变质品供应链协作研究

以交易信用为协调激励机制,分析了完全信息及双边不完全信息时,持续变质的易变质品供应链的协调问题.在交易信用激励机制下,供应商通过允许下游企业延迟支付贷款而激励其提高采购批量,进而实现供应链的协调.在信息对称时,通过分析双方的个人理性约束而给出交易信用长度的取值范围;当双方对彼此的资金成本存在双边信息不完全时,通过构建双边拍卖模型给出各方的最优报价策略以及均衡的交易信用长度.最后的算例验证了文章的结论.     

Multi-period hedging and coordination in a prefabricated construction supply chain

In this paper, a multi-period buffer space hedging coordination between a building contractor (BC) and a logistics provider (LP) is investigated. In order to facilitate the application of the construction lead-time hedging (CLTH) strategy, adopted by the BC, extra buffer space needs to be reserved at LP’s intermediate warehouse for contingency usage. This strategy is defined as ‘buffer space hedging (BSH)’ and it increases the pressure of LP on involving extra storage and maintenance cost. Two coordination mechanisms are adopted for solving this BSH problem. One scheme is by introducing a cost-sharing term. A Nash game model is studied to find the individual optimal decisions. Another scheme is a cooperative game model with proper side-payments. We show that adjusting the BSH amount for each review period benefits the supply chain. Both coordination mechanisms enable a win–win outcome. Especially, if system resources are sufficient, the cooperative game outperforms the Nash game. Numerical experiments further demonstrate that the benefit of the proposed model is more significant under the case with lower unit enlarging/rearrangement cost, higher tardiness penalty and unpredictable and uncontrollable construction process-determined assembled and installed prefabs.     

Dual-channel supply chain pricing decisions with a risk-averse retailer

This paper investigates a dual-channel supply chain with one risk-neutral manufacturer and one risk-averse retailer where there is only one perishable product with price-dependent stochastic demand. We choose Conditional Value-at-Risk criterion to measure the retailer’s risk-averse level, and assume that the manufacturer’s direct sales channel and the retailer’s traditional channel adopt a consistent pricing strategy. The model explores a Nash bargaining problem where the manufacturer and the retailer negotiate with each other on the wholesale price, the retail price and the order quantity when they have equal bargaining power. It is found that when demand uncertainty follows a uniform distribution, a Nash bargaining equilibrium exists and the retail price will decrease as the retailer becomes more risk averse. However, when the risk-averse indicator increases, the manufacturer’s profit on his direct channel will decrease, increase or first increase and then decrease, depending on the values of the related parameters. The profit shares of the manufacturer and the retailer under the Nash equilibrium model are related to the risk-averse indicator of the retailer. Furthermore, we perform three sets of numerical experiments to verify the effects of the retailer’s risk-averse indicator on decision-making and profit allocations under the different environmental parameters and gain several meaningful managerial insights.     

Trust-embedded coordination in supply chain information sharing

This paper studies supply chain coordination with trust-embedded cost-sharing contract. In a two-tier supply chain, a retailer (she) and a supplier (he) make their private demand forecasting individually. The retailer places soft-orders, which are costless, non-verifiable and cancellable before shipping, to the supplier. After that, the supplier relies on the retailer’s ordering information to update his demand evaluation and prepare his capacity. How much the supplier relies on the retailer’s ordering information is specified by trust, which is a kind of psychological feeling and affected by multiple factors. When the supplier does not fully trust the retailer, he tends to prepare a conservative capacity to avoid over-production. To coordinate the supply chain, a two-stage coordination process is proposed. At the first stage, the supplier and retailer negotiate a cost-sharing rule to bind soft-orders. At the second stage, the retailer places a soft-order and decides whether or not to bind it referring to the cost-sharing rule. After that, the supplier determines his optimal production capacity. We show that the retailer and supplier value trust differently in the experimental studies. We also find that there is a threshold of negotiation power for the supply chain partners which means the supplier’s/retailer’s expected profit drops down if his/her negotiation power exceeds certain thresholds. The experimental studies also show that the proposed the two-stage coordination is effective.     

Impact of an emergency order opportunity on supply chain coordination

We consider a manufacturer-retailer supply chain in the pre-selling and selling seasons, whereby the manufacturer can offer the retailer an emergency order opportunity with a limited commitment quantity in addition to the regular order from the retailer before the selling season. Due to the short lead time for the emergency order, the manufacturer needs to prepare for it in the pre-selling season by producing more than the regular order or reserving its capacity for the responsive production. Through mathematically modelling and analyzing the supply chain, we found that, when the emergency order opportunity is provided, the manufacturer might be worse off, although the retailer is always better off. We derive the conditions whereby both the manufacturer and retailer can benefit from the emergency order, and the supply chain profit can be maximised. Further, we show that the supply chain can be coordinated by setting only the unit price and maximum commitment quantity for the emergency order. We also prove that Pareto improvement can be always achieved by setting the unit price for the regular order in addition to the unit price and maximum commitment quantity for the emergency order.     

Supply chain resilience: model development and empirical analysis

The purpose of this study is to develop a hierarchy-based model for supply chain resilience (SCRES), explaining the dynamics between various enablers and validating the model empirically. Literature review and a survey identified the enablers. Interpretive structural modelling (ISM) is used to analyse the levels of relationships among enablers. Based on their driving power and dependence, these enablers are also classified into different categories. Structural equation modelling is used to validate the hierarchical SCRES model and test the path analytical model. The study provides empirical justification for a framework that identifies 13 key enablers of resilient supply chain practices and describes the relationship among them using ISM. It also classifies them using Matrix of Cross Impact Multiplications Applied to Classification analysis on the basis of their driver power and dependence. The key finding is that using the proposed model, organisations can enhance their resilience potential by modifying their strategic assets. The model was tested using rigorous statistical tests including convergent validity, discriminant validity and reliability. The holistic view offered by the proposed model depicts the relationship among enablers to achieve SCRES.