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Coordination with a backup supplier through buy-back contract under supply disruption

Author

Listed:
  • Hou, Jing
  • Zeng, Amy Z.
  • Zhao, Lindu

Abstract

This paper studies a buy-back contract between a buyer and a backup supplier when the buyer's main supplier experiences disruptions. The expected profit functions and the optimal decisions of the contract players are derived through a sequential optimization process. The common properties of the contract as well as the differences under the demand uncertainty and the main supplier's recurrent supply uncertainty are explored through comparative studies and numerical examples. The study contributes to the literature by providing a better understanding of the impacts of demand and supply uncertainties and by shedding insights on the value of a backup supply.

Suggested Citation

  • Hou, Jing & Zeng, Amy Z. & Zhao, Lindu, 2010. "Coordination with a backup supplier through buy-back contract under supply disruption," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 46(6), pages 881-895, November.
  • Handle: RePEc:eee:transe:v:46:y:2010:i:6:p:881-895
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