Supply chain financing with advance selling under disruption

Varun Gupta, Anshuman Chutani

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)2449-2468
Number of pages20
JournalInternational Transactions in Operational Research
Volume27
Issue number5
DOIs
StateAccepted/In press - Jan 1 2019

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Computer Science Applications
  • Strategy and Management
  • Management Science and Operations Research
  • Management of Technology and Innovation

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