Supply chain coordination with strategic customers: Yield uncertainty and replenishment tactic

Abstract

Supply capability and strategic customer behavior jointly influence the operations management in a supply chain (SC). Few studies have been conducted to reflect such a composite impact from the supply side and the demand side. The aim of our article is to fill this gap by focusing on the SC facing strategic customers under demand and yield uncertainty. Specially, we emphasize the importance of replenishment tactic in keeping a stable supply level, and discuss the corresponding impact on the input quantity decision of the SC under yield uncertainty. Two scenarios are investigated: (i) without the market service-level (MSL) constraint and (ii) with the MSL constraint. The SCs under different scenarios are coordinated by various contracts. Meanwhile, by adjusting corresponding contract parameters, the SC members can achieve Pareto improvement. The numerical analyses are used to examine the validity of the conclusions derived.

Keywords:

• Supply chain
• input quantity decision
• yield uncertainty
• market service-level constraint
• strategic customers

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 We also study an extension, that is, the demand is related to the service level in online Appendix B.

Additional information

Funding

This research is supported by National Natural Science Foundation of China (71972171).