How Supplier Default Correlation Affects Supply Chain Disruptions

In recent years,with the frequent occurrence of terrorist threats,military operations,diseases and natural disasters,the risk of supply chain is increasing.In particular,the out-break of the COVID-19 in late 2019 has prevented more and more suppliers from supplying under contract.Supply chain management based on supplier default risk has attracted wide attention and has become a hot topic of recent research.Multi-supplier sourcing strategies are the most common way to reduce supply chain risk.The traditional multi-supplier procurement strategy is based on the assumption that multi-supplier default is independent of each other.Based on the relevance of supplier default,this paper discusses the impact of pricing and ordering decisions of different supply chain members,as well as revenue.The research content and conclusion of this paper are divided into three aspectsFirst,we study the effect of disruption risk on a supply chain with price-dependent demand.We consider two unreliable supplier models,one for a single retailer and one for two competing retailers.The study found that in the ex-ante pricing scheme,the profits of supply chain members are not monotonous affected by the default correlation,and in the responsive pricing scheme,when the default correlation between suppliers increases,the suppliers' profits will decrease and the retailer's profit will increase.Furthermore,retailer is always more profitable under the responsive pricing scheme than they do under the ex-ante pricing scheme.In the model extension,the above results are not necessarily trueSecond,this paper studies the effect of disruption risk on a supply chain with a risk-averse retailer.We consider the supply chain of two suppliers and one retailer under two conditions,one for the exogenous wholesale price and the other for the endogenous wholesale price.In the case of exogenous wholesale prices,retailer's risk aversion has a non-monotonous effect on its total ordering quantity.In the case of endogenous wholesale prices,we find that the profits of the suppliers and the retailer are non-monotonic in retailer's risk aversion level or suppliers' default correlation.Finally,the numerical results indicate that when the suppliers' delivery rates are different,the supplier with a low delivery rate can benefit from the retailer's risk aversion under certain conditions.Third,this paper studies the impact of supply chain disruption risk under the pro-vision of services provided by retailers.The retailer is willing to offer some services to customers to increase demand in the market.There are three possible scenarios for s-trategic interaction between two suppliers and one retailer.When the cost of services is higher,the suppliers' profits are lower.When a retailer's bargaining power is no greater than that of the suppliers,the higher the cost of service is,the better it is for the retailer.When suppliers' bargaining power is no less than that of a retailer,increased competition between suppliers may be beneficial to their profits.The profits preferences of supply chain members under the retailer Stackelberg are consistent.The research content of the three directions of this paper is closely related.In the first study,we find that retailer's ordering strategies are discrete,i.e.they are either equal to market demand or zero.In the second study,we find that the reason for this phenomenon is that,the retailer is risk neutral.When a retailer has risk aversion behavior,the retailer's ordering strategies are continuous.Based on the model conclusion of the first direction,we get the equilibrium result of the decision-making of the supply chain members under which demand is price dependent.Thus,in the third study,we consider whether a retailer will increase market demand by providing services and analyze whether the model results under the new conditions have changed.The research of this paper involves the theory and method of risk control theory,op-eration research,game theory,etc.,on the basis of which,by setting up a clear research system,we can obtain the corresponding research conclusions by means of summary,anal-ysis and induction.The research goal of this paper is to solve the problems of supplier's pricing,retailer's order and sales,which is not only theoretical basis,but also more realis-tic.Through cross-cutting model analysis,such as operational planning and game theory,the conclusion provides multi-party theoretical support,for supply chain managers.The main innovat,ion point of this paper lies in the following three aspects.First,in the past,most studies of the disruption of default by multiple suppliers have mostly assumed that the supplier's defaults are independent,and that very few consider defaults are relevant,while in these literatures,deterministic market,demand and sales price are considered as exogenous.This paper considers a more general assumption that,a retailer needs to set its own price and that market demand is price-dependent.Second,in the relevant literatures,a retailer often order either the total market demand or zero,and do not partially order from suppliers.The new conclusions complement the literatures by taking into account the risk-averse behavior of the retailer.Finally,the market service fac-tor is considered into the study of supplier default disruption,and through three different power structures,we analyze the role of market service factor and supplier default corre-lation.The research results of this paper can provide management advice for managerial implications in their cooperation with suppliers or retailers.