The demand disruption management problem for a supply chain system with nonlinear demand functions

Abstract

This paper addresses the problem of handling the uncertainty of demand in a one-supplier-one-retailer supply chain system. Demand variation often makes the real production different from what is originally planned, causing a deviation cost from the production plan. Assume the market demand is sensitive to the retail price in a nonlinear form, we show how to effectively handle the demand uncertainty in a supply chain, both for the case of centralized-decision-making system and the case of decentralized-decision-making system with perfect coordination.

Keywords

Supply chain management / disruption management / demand uncertainty

References

[1] Boyaci T., Gallego. Coordinating pricing and inventory replenishment policies for one wholesaler and one or more geographically dispersed retailers. International Journal of Production Economics, 2002, 77: 95-111.

[2] Chen F., Federgruen A., Zheng Y.-S.. Coordination mechanisms for a distribution system with one supplier and multiple retailers. Management Science, 2002, 47(5): 693-708.

[3] Cliausen J., Hansen J., Lansen J., Larsen A.. sruption management. ORMS Today, 2001, 28(5): 40-43.

[4] Jeuland A., Shugan S.. Managing channel profits. Marketing Science, 1983, 2: 239-272.

[5] Milner J.M., Rosenblatt M.J.. Flexible supply contracts for short life-cycle goods: The buyers’s perspective. Naval Research Logistics, 2002, 49(1): 25-45.

[6] Qi X., Bard J.F., Yu G.. Supply chain coordination with demand disruptions, Working paper, 2002, Austin, TX: Department of Management Science and Information Systems, McCombs School of Business, The University of Texas

[7] Qi X., Bard J.F., Yu G.. Disruption management for machine scheduling: the case of SPT schedules, Working paper, 2002, Austin, TX: Department of Management Science and Information Systems, McCombs School of Business, The University of Texas

[8] Thengvall B., Bard J.F., Yu G.. Balancing user preferences for aircraft schedule recovery during irregular operations. IIE Transactions on Operations Engineering, 2000, 32(3): 181-193.

[9] Weng K.. Channel coordination and quantity discounts. Management Science, 1995, 41(9): 1509-1522.

[10] Yang J., Qi X., Yu G.. Disruption management in production planning, Working paper, 2001, Austin, TX: Department of Management Science and Information Systems, McCombs School of Business, The University of Texas

[11] Yu, G., M. Argüello, G. Song, S. M. McCowan, and A. White, A new era for crew recovery at continental airlines, to appear in Interfaces, 2002