Optimal ordering policy for a price-setting newsvendor with option contracts under demand uncertainty

In this article, we investigate the newsvendor problem in a joint ordering and pricing setting in the presence of option contracts under demand uncertainty. At the beginning of a single selling season, the newsvendor who faces additive stochastic demand can obtain goods through two ways: ordering from a firm or purchasing and exercising call options. Single ordering (ordering from a firm only or purchasing and exercising call options only) and mixed ordering (ordering from a firm and purchasing and exercising call options simultaneously) cases are investigated. We find that the newsvendor’s optimal pricing and ordering strategies exist and are unique for both cases, respectively. In addition, when both cases are available, mixed ordering is the newsvendor’s optimal ordering policy. If only single ordering is available, the newsvendor prefers ordering from a firm when demand risk is low, while enjoys purchasing and exercising call options when demand risk is high. We also find that with option contracts, the newsvendor’s optimal order quantity and maximum expected profit are all decreasing in the option price and exercise price of product, while the optimal retail price in terms of option price and exercise price of product are intricate. Moreover, we show that, mixed ordering is more capable to deal with supply price volatility risk.     

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.     

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.     

Supply chain disruption risk management through strategic information acquisition and sharing and risk-sharing contracts

In this paper, we develop a framework that captures the effects of information management and risk-sharing contracts in supply chain networks. In particular, we analyse the impact of strategic information acquisition and sharing on supply chain disruption risks and costs and we evaluate the supply chain performance of risk-sharing contracts. Risk-sharing contracts specify who needs to incur the costs when supply chain disruptions occur. We develop a model that consists of three tiers of multi-criteria decision-makers, manufacturers, retailers, and demand markets. We describe the behaviour or each decision-maker, derive the finite-dimensional variational inequality formulation of the equilibrium conditions of the supply chain and present numerical examples. The numerical examples highlight that it is not a priori clear which participant in the supply chain network will benefit from increased information-sharing activities. Our models indicate that the beneficiary of reduced information-sharing costs is in some cases dependent on the negotiation power of participants and that it is also dependent on the type of risk-sharing contract used. Furthermore, the numerical examples show that, in some cases, information-sharing and risk-sharing contracts are complements while in other cases they are substitutes.     

Rewards-supply planning under option contracts in managing coalition loyalty programmes

We examine the problem of planning the supply of rewards in coalition loyalty programmes considering that the buyer–supplier relationships with commercial partners are governed by option contracts rather than wholesale price contracts similar to what is commonly used in practice. We develop a two-stage stochastic linear programme model with simple recourse which considers uncertain demand requirements, limited reward purchasing budgets, multiple programme partners of various sizes, point-liability control targets and overall profitability. A sampling average approximation scheme is used to solve the model. Numerical experiments show that option contracts perform better than wholesale price contracts when redemption demand uncertainty is high and the number of redemption partners is large. The results also suggest that the common practice of increasing redemption capacities is not the most effective way to cope with demand uncertainties. Programmes that reduce redemption demand variability and/or create better contracting structures are more promising in improving points-liability, redemption budget spending and overall profitability than traditional approaches.     

Supply chain risk management: a literature review

Risk management plays a vital role in effectively operating supply chains in the presence of a variety of uncertainties. Over the years, many researchers have focused on supply chain risk management (SCRM) by contributing in the areas of defining, operationalising and mitigating risks. In this paper, we review and synthesise the extant literature in SCRM in the past decade in a comprehensive manner. The purpose of this paper is threefold. First, we present and categorise SCRM research appearing between 2003 and 2013. Second, we undertake a detailed review associated with research developments in supply chain risk definitions, risk types, risk factors and risk management/mitigation strategies. Third, we analyse the SCRM literature in exploring potential gaps.     

Supply chain risk management and its mitigation in a food industry

We create a model which analyses the various risks involved in a food supply chain with the help of interpretive structural modelling (ISM). The various types of risks were identified based on a review of the literature and in consultation with experts in the food industry. The types of risks are clustered into five categories and risk mitigation is discussed. The model developed is validated with the help of a case study involving a food products manufacturing firm.     

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.     

Contract design for cooperative product service system with information asymmetry

This paper studies how to effectively provide product service system (PSS) in the supply chain with asymmetric information for service-oriented manufacturing (SOM). With a PSS, the manufacturer chooses the product quality, and the retailer, who possesses private cost information, is responsible for adding necessary value-added service based on the basic product. The analytical underpinnings of our work are provided by the principal-agent paradigm. In the paper, we develop three types of contracts and conduct a detailed comparison among the three contract models. With these studies, we find that: (i) the wholesale price contract is dominated by the other two contracts, (ii) The retail price maintenance contract can always generate a higher profit for the manufacturer and a higher welfare for the consumers, whereas the franchise fee (FF) contract can always generate a higher profit for the retailer and (iii) The FF contract can always stimulate more service from the retailer. Our theoretical and numerical results show that there are significantly different effects when the three types of contracts are utilized in the supply chain for SOM with asymmetric information, and which of them is the most attractive will depend largely on the power structure of the supply chain and/or their cost information types.     

Supply chain risk management and artificial intelligence: state of the art and future research directions

Supply chain risk management (SCRM) encompasses a wide variety of strategies aiming to identify, assess, mitigate and monitor unexpected events or conditions which might have an impact, mostly adverse, on any part of a supply chain. SCRM strategies often depend on rapid and adaptive decision-making based on potentially large, multidimensional data sources. These characteristics make SCRM a suitable application area for artificial intelligence (AI) techniques. The aim of this paper is to provide a comprehensive review of supply chain literature that addresses problems relevant to SCRM using approaches that fall within the AI spectrum. To that end, an investigation is conducted on the various definitions and classifications of supply chain risk and related notions such as uncertainty. Then, a mapping study is performed to categorise existing literature according to the AI methodology used, ranging from mathematical programming to Machine Learning and Big Data Analytics, and the specific SCRM task they address (identification, assessment or response). Finally, a comprehensive analysis of each category is provided to identify missing aspects and unexplored areas and propose directions for future research at the confluence of SCRM and AI.     

Information management strategies and supply chain performance under demand disruptions

The operations management literature presents inadequate comprehensive understanding on information management strategies of mitigating supply chain disruption risks. By using control theory modelling and simulation, this study compares the disruption mitigation effects of three information management strategies. From the aspect of stability, the existing stability boundaries are revised by a new method in a two-echelon case. It shows that supply chains (SC) with popular information management strategies are not evidently more stable than traditional ones. From the aspect of disruption recovery time, an innovative two-echelon swiftest response problem under these information management strategies is formulated and solved. Results show that a collaborative planning, forecasting and replenishment (CPFR) SC with complete SC information performs the best. However, in a later operational risk mitigation test, an information sharing (IS) SC with partial information has the smallest bullwhip effect. From the aspect of demand amplification and frequency response, an innovative frequency–response plot of order amplification is proposed in a time-continuous SC with moving average forecasts. It implies the best frequency response for concurrently mitigating both operational and disruption risks coming from a CPFR SC. But for a certain SC structure there is still a balance between mitigating bullwhip effect and quick response. Moreover, it also implies that anti-bullwhip should exist in a certain condition, as realised in our numerical experiments.     

Supply chain resilience for single and multiple sourcing in the presence of disruption risks

This paper investigates the use of sourcing strategies to achieve supply chain resilience under disruptions. The coping strategies considered are single and multiple sourcing, backup supplier contracts, spot purchasing, and collaboration and visibility. Collaboration and visibility, which affect suppliers’ recovery capabilities and a buyer’s warning capability, have not been similarly modelled in the past. A scenario-based mathematical model is developed such that it considers objectives under uncertainties including disruption risks and operational risks. A broad numerical study examines its output for various risk attitudes in a decision-maker, ranging from risk neutral to risk averse. The sensitivity of procurement strategies to other key parameters such as recovery and warning capabilities is examined. One of the major findings is that buyer’s warning capability plays a vital role in enhancing supply chain resilience. We seek to build on these efforts to further support disruption planning and mitigation and to obtain a deeper understanding of the relationship between supply chain characteristics and resilience.     

多个损失厌恶零售商共存的一对多供应链 回购契约及其协调机理

为实现供应链的整体运作绩效最大,本文以一个风险中性的供应商和多个损失厌恶的零售商组成的两阶段供应链为研究对象,基于前景理论对损失厌恶的界定,采用考虑零售商损失厌恶系数的供应链回购契约模型。论证得出,多个存在竞争关系的损失厌恶零售商存在唯一的纳什均衡总订购量使其期望效用最大;在零售商的损失厌恶程度较大或者数量较少的情况下,通过供应链回购契约的协调,存在唯一的回购价格使得供应链的整体运作绩效最大,实现供应链协调。     

Supply chain risk mitigation competency: an individual-level knowledge-based perspective

Supply chain managers are responsible for making decisions regarding supply chain risk in order to mitigate the impact of supply chain disruptions. This study develops and tests a theoretical model that leverages the individual-level knowledge-based view perspective to understand the process through which risk mitigation orientation of the supply chain manager contributes to his/her absorptive capacity. A supply chain manager’s absorptive capacity, in turn, enhances his/her ability to effectively mitigate supply chain risk. Study findings demonstrate that supply chain managers with high-risk mitigation orientation have greater level of absorptive capacity which enhances their risk mitigation competency. This study represents the first development and testing of a model that examines individual-level knowledge management factors that affect supply chain risk mitigation competency. This research emphasises the importance of the individual supply chain manager in managing risk and illustrates how theoretical perspectives from the knowledge management, supply chain risk and organisational behaviour literature can be fruitfully adopted to explain behaviour in the field of supply chain risk management.     

Supply chain models with corporate social responsibility

Currently, corporate social responsibility (CSR) has become a critical issue because more than 88% of consumers think companies should try to achieve their business goals while improving society and the environment. This paper focuses on a CSR supply chain where an Original Equipment Manufacturer’s (OEM’s) sales can be significantly reduced because of its oversea supplier’s social misconduct. Specifically, as in a conventional wholesale price contract the supplier determines its wholesale price and the OEM decides its order quantity, but in a CSR supply chain, the supplier can autonomously change its CSR cost once a minimum requirement is satisfied. A higher CSR cost means that the supplier invests more in its corporate social responsibility and the OEM’s sales will be less likely to be influenced by negative CSR events. The equilibrium solutions show an important dilemma – although the supplier’s profit increases in the basic CSR requirement, the supplier will always use the minimum CSR cost under the conventional wholesale price contract, which eventually leads to a low supply chain profit. Thus, we introduce two different contracts to handle this problem: the flexible quantity contract and the wholesale price incentive contract, which are, respectively, a ‘tough’ way and a ‘beneficent’ way for the OEM to solve the problem. Although the two ways cannot (always) coordinate the supply chain, we show that they both will significantly improve the supply chain performance. Our results also show that in some conditions, one strategy will dominate, whereas in different conditions the other strategy dominates.     

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.     

Supply chain risk modelling and mitigation

In today’s global competitive environment, supply chains are more susceptible to vulnerability due to the increasing occurrence of internal and external risk events. In addition, the trend associated with lean management, which involves reducing inventory, leads to more dependency of supply chain partners on each other which exacerbates risk exposure of companies in the supply chain. This creates the need for more effective management of supply chain risks. In this research, a methodology based on Bow-Tie analysis and optimisation techniques is proposed to quantify and mitigate supply chain risks. The proposed methodology takes into consideration risk interconnections, and it identifies the best combination of mitigation strategies under budget constraints. A real case study from a high-end server manufacturing environment is presented. Results from the case study showed that the proposed methodology for risk modelling and mitigation can effectively be used to quantify the risks and achieve the required risk reduction at minimum cost while considering risk correlations.     

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.     

国外ICT供应链安全管理研究及建议

鉴于国家关键基础设施和关键资源(CIKR)对信息通信技术(ICT)的依赖,识别和控制ICT供应链风险已成为保障国家安全的重要手段。美国作为ICT供应链管理的先行者,在提升战略地位、开展风险管理、确保软硬件安全、监管政府采购等方面为各国提供了丰富经验;欧盟、俄罗斯也加强了ICT供应链的安全管理。在分析上述国外情况的基础上,给出了完善我国ICT供应链安全管理的相关建议。     

考虑更新时间的汽车租赁闭环供应链回购激励模型

针对单个汽车制造商和单个租赁商构成的二级闭环供应链系统,在租赁需求随时间呈指数下降以及回购价格与产品维护水平具有相关性的前提下,研究了占主导的制造商对租赁商的回购激励策略,考虑了租赁商的车辆更新时间、产品维护水平、资金成本以及二手市场对供应链决策的影响,并与制造商不采用回购激励策略进行了比较.结果表明:当回购率满足一定条件时,制造商可通过调整奖惩因子来实现供应链利润在其与租赁商之间的分配,从而保证供应链能达到协调状态.