Contracting mechanism with imperfect information in a two-level supply chain

Operational Research - Tập 20 - Trang 349-368 - 2017
Asif Muzaffar1, Shiming Deng2, Muhammad Nasir Malik1
1Business School, University of Central Punjab, Lahore, Pakistan
2School of Management, Huazhong University of Science and Technology, Wuhan, People's Republic of China

Tóm tắt

This article investigates a two-level supply chain consisting of a single manufacturer and a retailer. The retailer’s ordering patterns are highly influenced by his risk preferences. We discuss ordering policies when the manufacturer has limited demand information and propose a production-commitment contract, which mitigates double marginalization under imperfect information. Demand distribution is private information of the retailer and the manufacturer only assumes an educated guess about the mean and variance. Production-commitment contract is an attractive option for make-to-stock scenarios where quantity is confirmed after the demand is realized. We show that lack of information may not have an adverse effect. We also prove analytically that informational advantage may not necessarily be a supply chain advantage and also provide numerical insights for a win-win situation.

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