Research On Operational Strategies For The Supply Chain Of Seasonal Products With Risk Or Loss Preference

In recent years, with the enhancement of people’s living standards, consumers’ demand isincreasingly presenting lots of new characteristics such as diversification and personalization;and the rapid development of science and technology has caused the upgrading productaccelerates continuously and product life cycle is shortened gradually. Resulting from thesechange, more and more products have the characteristics of seasonal products which alsooccupy a large proportion in the national economy of our country. But due to theobvious characters of long production lead time,short sales period, low residual value ofunsold products in the end of period and uncertainty demand, operations of the seasonalproduct supply chain members are facing negative impacts and business risks. Therefore, howto make the decision for marketing operation and supply-chain management of seasonalproducts is a very challenging problem.Sinee1990s, a lot of researches built on the newsboymodel and extensive models have been conducted to solve above problem and lead to thesignificant progress in the theory of operational strategy and supply chain management ofseasonal products. However, the existing relevant researches mainly assume that businessdecision-makers are completely rational and risk neutral, but in recent years, more and moreexperimental and empirical studies tell us that decision-making under the condition ofuncertain environment usually has cognitive biases and different choice preferences, whichleads to a new research direction in the study of operational management of seasonal productsupply chain.Taking some businesses and supply chains which product or sell seasonal products asresearch objects, this dissertation builds several more practical models about marketingoperation and supply chain coordination of seasonal products, and takes into accountsome typical choice preferences (such as risk preference, loss preference) in decisionmaking by the participants. In these studies, we try to consider different decision contentswhich contain inventory ordering, advertising and pricing operation issues of a single-levelcompany as well as optimization game and coordination operation of a multi-level supplychain, and intend to make further extensive study on the related researches from differentaspects. The details are given as below.1.Reseach on the marketing and operation strategies of a dealers who is risk averse andsell some seasonal product to the end customers under the Conditional Value-at-Risk(CVaR)criterion. First, we consider the optimal advertisement cost and order policy under CVaRcriterion in a Newsboy model, where the retailer is risk averse and faces a random demanddepending on advertising expenditure. Then, this dissertation further extends the model above by considering the combined effect of advertising and pricing on random demand, and build astochastic model about the joint decision-making problem of advertising expenditure、retail pricing and order quantity for risk-averse retailers under uncertain demand. At last, theeffect of risk aversion on the above optimal operation strategies are also analyzed.2. Study on the cooperative advertising and ordering issue of a two-echelon supply chainwhere one risk-averse manufacturer sells a seasonal product through one risk-averse retailer.This dissertation uses conditional value-at-risk, i.e., CVaR to capture the risk-aversionpredispositions of the two participants, and assumes that the demand for the seasonal productis a random variable with arbitrary distribution and that it is subject to both the manufacturer’sand the retailer’s advertising expenditures. Under both centralized and non-centralizedsettings, the optimal cooperative advertising spending by the two supply chain members andthe ordering strategies at the initial stage of sales are deduced. The study finds that the supplychain is able to be coordinated only on the condition of the risk aversion coefficient of thewhole supply chain is no less than the bigger one of the risk aversion coefficients of theretailer and the manufacturer. At last the dissertation concludes by proposing a profit-sharingcontract to achieve supply chain coordination in three special cases.3. Research on the optimal ordering strategies for seasonal products based on spectrumrisk measure and option contract. In this dissertation, we incorporate retailer’s different riskattitudes by means of spectrum risk measure into the ordering decision model for seasonalproducts, and discuss the optimal ordering decisions of the retailer under the option contractmechanism. We show that the optimal ordering quantities of cash commodity and optioncommodity are existent and unique, and then analyze the specific ordering strategy of theretailer who has different risk preferences through the Mean-CVaR risk spectrum function.The effects of the retailer’s risk attitude, and the price parameters of option contract on theoptimal ordering decisions are also analyzed. Finally, we illustrate our theoretical results bysome numerical examples.4.Research on the operational issues of seasonal product supply chain system whichincludes some risk averse participants. For a single-level retail company in the system,introducing the effect advertisement propaganda on the marketing random demand of themerchandise and assuming that the expected demand of the merchandise is an increasingconcave function of advertisement investment cost, this dissertation develops a correspondingjoint decision-making model of advertising expenditure and order quantity based on lossaversion utility function within prospect theory framework. The study results indicate thatboth the optimal order quantity and the advertising expenditure of loss-averse retailers are lessthan those of risk neutral retailers. However, with the increase of shortage cost, loss-averseretailers will gradually decrease advertising expenditure but will not decrease order quantity. And then this dissertation develops a revenue-sharing contract coordination model in atwo-stage supply chain consisting of a supplier and multiple loss-averse retailers. It is foundthat there is a unique Nash equilibrium total order quantity to maximize the expected utility ofmultiple competing loss-averse retailers, and the optimal total order quantity increases as thenumber of retailers increases but decreases as the degree of risk aversion increases.Furthermore, a unique ratio of wholesale price and revenue sharing fraction is proved tocoordinate the whole supply chain based on revenue-sharing contract mechanism, and therelation between the optimal contractual parameters are deduced. Finally, a numericalexample is given to illustrate the theoretical results of the proposed model.The extensive research results presented above not only enrich the content of supplychain management theory of seasonal products, but also widen the applied areas of thesetheoretical results because which are accord better with reality. Hence the dissertation hastheoretical significance and practical value to the operational strategy and supply chainmanagement of seasonal products which are widespread in our China.