Procurement strategy determining and supply chain coordination with random yields

Abstract

After the outbreak of epidemic of COVID-19, earthquakes or floods, the suppliers who urgently provide related goods or materials may be dominant in the transaction between buyers and sellers. Even if the quantities of goods fluctuate within a certain range, the customer can accept it and expects transaction. Under the mode of Make-to-order (MTO), for the supply chain consisting of a manufacturer and a supplier with random yields, the optimization models about centralized and decentralized situation were established respectively based on flexible and fixed procurement strategy, and the differences of optimal ordering quantities, input quantities and performances between the two procurement strategies was analyzed. For the flexible procurement strategy, the coordination mechanism of revenues and risks sharing, outputs deficiency punishment was proposed;while for the fixed procurement one, the coordination mechanism was revenues and risks sharing, and wholesale price discount. The research showed that the optimal order quantities of manufacturer were the largest under flexible procurement strategy/centralized situation, then the second largest under fixed procurement strategy/centralized situation, and was the minimum and equal under decentralized situation for different strategies;for the supplier, the input quantities under flexible strategy was closer to the order quantities than the fixed strategy;from the perspective of performances analysis, the flexible procurement strategy was more beneficial to the whole supply chain and the supplier, while the fixed procurement one was more beneficial to the manufacturer. The internal and external conditions for determining purchasing strategies were given, and some measures were proposed to strengthen information sharing, promote strategic mutual trust and prevent moral hazard. © 2021, Editorial Department of CIMS. All right reserved.