Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/10284
Title: Supply chain coordination with dual procurement sources via real-option contract
Authors: Luo, M
Li, G
Wan, CLJ
Qu, R
Ji, P 
Keywords: Dual-sourcing
Real-option
Spot market
Supply chain coordination
Supply chain management
Issue Date: 2015
Publisher: Pergamon Press
Source: Computers and industrial engineering, 2015, v. 80, p. 274-283 How to cite?
Journal: Computers and industrial engineering 
Abstract: In a two-stage supply chain with a supplier and a manufacturer, the manufacturer can purchase a product either from the supplier or in the spot market. The spot market, however, inevitably involves price fluctuation risk and supply risk. Assuming that the manufacturer is the leader in a procurement game and offers a real-option contract to the supplier, we study the manufacturer's optimal mixed procurement strategy that integrates the use of the real-option contract and the spot market. Moreover, we analyze the effects of the price risk and the supply risk in the spot market on market equilibrium. We show that using the real-option contract mechanism improves the overall expected profit of a supply chain and guarantees supply chain coordination in the presence of the spot market. The results also demonstrate that the price risk and the supply risk in the spot market adversely affect the manufacturer's expected profit. On the contrary, these two risks bring benefits to the supplier.
URI: http://hdl.handle.net/10397/10284
ISSN: 0360-8352
EISSN: 1879-0550
DOI: 10.1016/j.cie.2014.12.019
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