Supply Chain Coordination with Multiple Competing Newsvendors

For a supply chain system with one supplier and multiple retailers who faces stochastic market demand, it can be coordinated with contracts (e.g., wholesale price contract, buy back contract, and revenue sharing contract). We find that wholesale price contract can coordinate the supply chain in the multiple newsvendors case and revenue sharing contract is equivalent to buy back contract in the newsvendors case with a fixed retail price. The purpose of this paper is to investigate the supply chain that experiences a demand disruption during the planning horizon. First, we show that the coordination may be broken off by an emergent event, which make the demand disruptions, that is, it makes the demand distribution different from the assumption needs to achieve original supply chain´s coordination. Second, we show that changes to the original plan induced by an emergent event may impose considerable deviation costs throughout the system and make the supply chain uncoordinate. We derive conditions that indicate when the maximum profit can be achieved. Then, optimal strategies for supply chain to the disruptions by contracts are presented. Last, the adjusted contracts which have antidisruption ability are proposed, and they can be used as effective schemes to coordinate supply chain in a large range of situations.