Supply Contract With Call Options Under Replenishment

In the supply chain system of innovative products,a key problem affecting the performance of the supply chain is the mismatch between supply and demand.A large number of studies have shown that the introduction of option contracts in the supply chain which is composed of a single supplier and a single retailer can effectively solve the problem of supply and demand mismatch and improve the performance of the supply chain.However,the introduction of options actually transfers some of the risk of demand uncertainty from retailers to suppliers.That is,the supplier will have the risk of surplus product inventory.Moreover,as the number of retailers increases,so does the risk to suppliers.In order to solve the above problems,this paper studies the innovative products supply chain which is composed of a single supplier and two independent retailers with random demand,and proposes the new concept of call option contract under replenishable conditions.This paper constructs the traditional newsboy model,the call option model and the call option model under replenishable condition.The optimal decisions of retailers under different models are obtained from the perspective of retailers,and the output and average residual product inventory are analyzed from the perspective of suppliers.Finally,an example analysis method is used to demonstrate the model.On the one hand,from the perspective of retailers,this paper compares the call option model under replenishable conditions with the newsboy model,and concludes that the retailer's expected profit in the call option model under replenishment is always higher than the newsboy model.Through the comparison between the call option and the call option under replenishment,it is concluded that the initial order quantity of the former is consistent with the optimal order quantity of the call option,the optimal purchase quantity of the option is less than the optimal purchase quantity of the call option,the retailer's profit is always higher than the call option.That is,the replenishable condition is favorable to the retailer.On the other hand,from the perspective of suppliers,this paper makes a comparative analysis of the output and average residual inventory of suppliers in the call option model under replenishment and the non-replenishable call option model,and proves that the former can reduce the output and inventory risk of suppliers more than the latter.That is,the replenishable conditions are beneficial to suppliers.In a word,this paper demonstrates the validity and practicability of call option under replenishment from two perspectives of retailer and supplier,and proves that the call option model under replenishment not only reduces the inventory risk of supplier caused by the introduction of option contract,but also meets the replenishment demand of retailer.Provide some reference for supply chain researchers and managers.