Supply chain financing with advance selling under disruption

Gupta, Varun; Chutani, Anshuman

Abstract

© 2019 The Authors. International Transactions in Operational Research © 2019 International Federation of Operational Research Societies We study a financing problem in a supply chain (SC) consisting of one supplier and one buyer under supply disruption. The supplier could face a disruption at its end which could effectively reduce its yield in case of disruption, thereby resulting in supply yield uncertainty. The retailer can finance the supplier using advance selling that can help mitigate the impact of disruption. We model this problem as a Stackelberg game, where the supplier as the leader announces the wholesale price and the retailer responds by deciding its optimal order quantity given stochastic demand and an exogenous fixed retail price. The supplier then commences production and a disruption can happen with a known probability. We assume that under disruption the quantity delivered is a fraction of the initial quantity ordered by the retailer. The retailer loses any unmet demand. We analyze three different scenarios of the Stackelberg game, namely no advance selling with disruption, advance selling without disruption, and advance selling with disruption. Our results indicate that advance selling can be used to mitigate the impact of supply disruption and at the same time could lead to an increase in the overall SCprofit.

Citation

Gupta, V., & Chutani, A. (2020). Supply chain financing with advance selling under disruption. International Transactions in Operational Research, 27(5), 2449-2468. https://doi.org/10.1111/itor.12663

• Journal Article Type: Article
• Acceptance Date: Nov 28, 2018
• Online Publication Date: Mar 27, 2019
• Publication Date: 2020-09
• Deposit Date: Dec 14, 2018
• Publicly Available Date: Mar 28, 2021
• Journal: International Transactions in Operational Research
• Print ISSN: 0969-6016
• Electronic ISSN: 1475-3995
• Publisher: Wiley
• Peer Reviewed: Peer Reviewed
• Volume: 27
• Issue: 5
• Pages: 2449-2468
• DOI: https://doi.org/10.1111/itor.12663
• Keywords: Supply chain finance; advance selling; supply disruption; supply chain risk management
• Public URL: https://nottingham-repository.worktribe.com/output/1409874
• Publisher URL: https://onlinelibrary.wiley.com/doi/abs/10.1111/itor.12663
• Additional Information: This is the peer reviewed version of the following article: Gupta, V. and Chutani, A. (2019), Supply chain financing with advance selling under disruption. Intl. Trans. in Op. Res.. , which has been published in final form at https://doi.org/10.1111/itor.12663; . This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Use of Self-Archived Versions.
• Contract Date: Dec 14, 2018