Quantitative analysis of multi-periodic supply chain contracts with options via stochastic programming
AbstractWe propose a stochastic programming approach for quantitative analysis of supply contracts, involving flexibility, between a buyer and a supplier, in a supply chain framework. Specifically, we consider the case of multi-periodic contracts in the face of correlated demands. To design such contracts, one has to estimate the savings or costs induced for both parties, as well as the optimal orders and commitments. We show how to model the stochastic process of the demand and the decision problem for both parties using the algebraic modeling language AMPL. The resulting linear programs are solved with a commercial linear programming solver; we compute the economic performance of these contracts, giving evidence that this methodology allows to gain insight into realistic problems.
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Bibliographic InfoPaper provided by HEC Paris in its series Les Cahiers de Recherche with number 733.
Length: 31 pages
Date of creation: 01 Sep 2001
Date of revision:
stochastic programming; supply contract; linear programming; modeling software; decision tree;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- M11 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Production Management
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