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Impact of Back up Quantity Contract on Two-level Supply Chain: A Simulation Approach

International Journal of Supply Chain Management

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Field Value
 
Title Impact of Back up Quantity Contract on Two-level Supply Chain: A Simulation Approach
 
Creator Muzaffar, Asif; Huazhong University of science and technology, Wuhan, P.R,China
Deng, Shiming; Operations Research and Logistics Department,
Huazhong univeristy of science and technology, Wuhan P.R. China
 
Description In this new era of Supply chain coordination contracts are offered and accepted according to the varying need and specification of the industry and business in discussion. The contract variations arise according to the circumstances and adaptability by both manufacturer and retailer. An important challenge faced by the contracts being offered is the adaptability and robustness when demand observed is different from the forecast. Because of stochastic and uncertain demand, retailer faces lost sales and eventually loses revenue within the same horizon. This paper discusses a back up quantity contract for a single season in which retailer orders for one-shot inventory ordering. Manufacturer retains some part of the ordered inventory as backup and provides the units at first stage. If stock at retailer lags behind the demand, he gets the backup quantity otherwise he pays some agreed upon nominal price to manufacturer in case that inventory is not at all required. We assumed the case of single manufacturer and single retailer. If units are not required, the risk of holding inventory lies with manufacturer and salvaged at zero. The strategy is suitable for businesses having short seasonal products and high demand variability. We used Monte Carlo simulation for analyzing lost sales and supply chain profit scenario and used worst case distribution and normal distribution to validate the Pareto improving contractual relationship.
 
Publisher International Journal of Supply Chain Management
 
Contributor 1. National Natural Science Foundation of China (NSFC No. 70971047)
 
Date 2013-03-31
 
Type Peer-reviewed Article
 
Format application/pdf
 
Identifier http://ojs.excelingtech.co.uk/index.php/IJSCM/article/view/692
 
Source International Journal of Supply Chain Management; Vol 2, No 1 (2013): International Journal of Supply Chain Management (IJSCM)
 
Language en
 
Rights The copyright of the contribution is transferred to IJSCM in case of acceptance. The copyright transfer covers the exclusive right to reproduce and distribute the contribution, including reprints, translations, photographic reproductions, microform, electronic form, or any other reproductions of similar nature.The Author may publish his/her contribution on his/her personal Web page provided that he/she creates a link to the mentioned volume of IJSCM.The Author may not publish his/her contribution anywhere else without the prior written permission of the publisher unless it has been changed substantially. The Author warrants that his/her contribution is original, except for such excerpts from copyrighted works as may be included with the permission of the copyright holder and author thereof, that it contains no libellous statements, and does not infringe on any copyright, trademark, patent, statutory right, or propriety right of others.The Author also agrees for and accepts responsibility for releasing this material on behalf of any and all co-authors.