Coordination of Supply Chain after Production Cost and Demand Disruptions

This paper addresses coordination problem of a supply chain comprising one supplier and one retailer under production cost and market demand disruptions. Assume the market demand is sensitive to retail price in an exponential form, the optimal strategies are obtained for different disruption scale under centralized-decision system, and it is shown that the original production plan of the supply chain has certain robustness under the disrupted production cost and the disrupted market scale. For the decentralized-decision system, it is proved that the supply chain can be fully coordinated by the quantity discount contracts appropriately.