Title: Supply chain coordination under financial constraints and yield uncertainty

Authors: Hongjun Peng; Tao Pang

Addresses: College of Economics and Management, Nanjing Forestry University, Nanjing 210037, China ' Department of Mathematics, North Carolina State University, Raleigh, NC 27695-8205, USA

Abstract: A coordination problem for a supply chain with capital constraints and yield uncertainty is considered in this paper. In order to improve the supply chain, a buyback and risk sharing (BBRS) mechanism is proposed, in which the distributor shares the supplier's yield uncertainty risk by purchasing the overproduced products or waiving the shortage penalty, and the supplier shares the distributor's demand uncertainty risk by buying back the unsold products. The results indicate that, the profits and the strategies under the BBRS are the same with those under the centralised case. In addition, the proposed BBRS mechanism has a built-in mechanism to allocate the spillover profit between the supplier and the distributor. The results also show that the BBRS can increase the production quantity. Finally, we derive the bankruptcy probabilities for both the supplier and the distributor, and the probabilities depend on their initial capitals. [Received 4 August 2018; Accepted 18 January 2020]

Keywords: supply chain finance; capital constraint; yield uncertainty; buyback; risk sharing.

DOI: 10.1504/EJIE.2020.112493

European Journal of Industrial Engineering, 2020 Vol.14 No.6, pp.782 - 812

Accepted: 18 Jan 2020
Published online: 08 Jan 2021 *

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