Supply Is Not Reliable Conditions Retailer Ordering And Supplier Investment Strategy Study

Advances in information technology have opend new venues for companies to creat more flexible supply chain by tight connectivity and worldwide corporation. A growing number of companies focus on developing their core business in order to get the core competition when sourcing from international firms. Meanwhile, companies outsource portions of production and other operations lead to more unreliability in supply chain.Supply uncertainty and stochastic demand are challenges faced by numerous firms. In the one hand, stochastic demand is a common phenomenon in perishable goods industry. In the other hand, one common uncertain supplier is random yield and random lead time. All the supply mismanagement can be grave consequences for firms, matching the supply and demand has become more difficult.To best of our knowledge, the existing supply uncertainty literatures stand on the downstream perspective and focus on inventory decisions and sourcing strategies. The reality, however, is that supplier often changes their supply reliability by increasing additional investment. It is necessary to do some research from the perspective of upstream under the stochastic demand and supply uncertainty.Based on previous theoretical research, the primay focus of this paper is on analyzing retailer's ordering decision and supplier's investment decision under the conditions of unreliable supplier and stochastic demand as follows.1. Our analysis is restricted to a single product and single-period setting in sole sourcing supply chain so that we can obtain structural insights into these decisions. The results indicate that the optimal quantity depends on the mean and standard deviation of the supply ratio associated with supplier, and supplier would increase the mean reliability in order to improve the supply reliability when marginal cost of mean reliability is equal to the standard deviation reliability. And vice versa.2. Base on the section 1, we expand the model to the dual sourcing supply chain under similar conditions. The result is indicative of the fact that whole price is the primary driver as compared with reliability in supplier selection while quantity allocation is determined by cost and reliability parameters of each supplier. And similarly, supplier would increase the mean reliability in order to improve the supply reliability when marginal cost of mean reliability is equal to the standard deviation reliability under condition of two suppliers are independent of each other. 3. Base on the section 1,considering a situation in which a retailer has two instants to order a seasonal product before the start of the selling season. While the demand and supply are both uncertain, retailer could improve the demand forecast by utilizing the market information. This result potins to the fact that quantity allocation depends on the two instants'wholeprices, market demands and the first instant's supply reliability. Optimal order quantity is determined by two instants'wholeprices, market demands and supply reliability. Strategy of improving instants'supply reliability depends not only upon two instants unit profit, but also on the reliability of another instant.