Supply Chain Coordination And Operation With Risk-preference Deciders And Revenue-sharing Contracts

Coordination has always been the research focus in supply chain management.Traditionally, all parties are assumed to be risk-neutral when designing a coordinationstrategy. That is, each party in the supply chain seeks to maximize its expected utility orminimize its expected cost, not concerning the entire supply chain’s performance. In thisinstance, this paper investigates supply chain coordination with a risk-preferencemanufacture under revenue-sharing contracts, to achieve the entire supply chain’soptimization. Especially, this paper considers CVaR criterion to measure manufacture’srisk-averse, which manufacture optimizing its CVaR performance when designing strategy.Different from other, manufacture has the following character in this paper:(1)manufacture has capacity restraints, it can work overtime or outsourcing for uncompletedpart;(2) manufacture has risk preference, exploring the relationship between itsrisk-preference and production strategy using risk preference factor;(3) using CVaR(Conditional Value at Risk) criterion to measure its risk-averse character, exploring therelationship between its risk-averse and the supply chain coordination. The research findsthat capacity constraint brings risks to manufacture, which leads to supply chain’s poorperformance. Besides, deciders’ strategy is directly affected by their risk preference, andrisk-averse deciders tend to make conservative strategy, especially under CVaR criterion.