Research On The Application Of Supply Contract With Call Options In Three-echelon Supply Chain

Innovative products generally have the characteristics of long production lead time,short sales season and high demand uncertainty.In such supply chains,it is often difficult to match supply and demand,resulting in poor performance of supply chain.Previous studies have shown that many traditional contracts can improve the overall performance of the supply chain in dealing with demand uncertainty.In particular,options have the characteristics of better control of demand risk and fle xible adjustment.In these option contracts,call option contract can improve the flexibility of the supply chain by giving buyer upward adjustment right of the initial order.Many scholars have applied them to the inflexible supply chain and introduced them into the supply chain as a solution.Most of the existing studies focus on the application of call option contract in the secondary supply chain,but few focus on the three-echelon supply chain.However,in reality,the supply chain often presents a three-echelon or even more complex network structure,involving multiple transaction processes,making the performance of the supply chain even less than ideal.Based on the existing research,this paper includes the call option contract into a three-echelon supply chain including a manufacturer,a distributor and a retailer,where both the manufacturer and the distributor can sell options to the downstream,and the decision variables are the price of the option contract,the order quantity of the distributor and the order quantity of the retailer.Considering in the case of demand uncertainty,distributors based on the retailer’s demand forecast and according to the demand of the retailers directly order of these two kinds of order model,and based on the two modes of supply chain processes respectively established combined option contract model(between manufacturers and distributors,distributors and retailers are using call option contract,to demand forecasting and distribution chamber of commerce)and man y options contract model(between manufacturers and distributors,distributors and retailers are using call option contract,according to the retailers and distributors of the actual order to make a decision).An example is given to analyze whether the abov e two models can improve the profit of participating members of the supply chain,and to compare the profit size of the two ordering modes.From the same perspective,the combined option contract model and the decentralized decision model,and NV-SCCO(manufacturers and distributors only use the wholesale price contract,while distributors and retailers use the call option contract)are compared and analyzed horizontally.Because the decision of distributor in the combined option contract model is different f rom the single order decision or pricing decision in the past,based on the optimal decision of distributor,the correlation between order decision and pricing decision is analyzed.Finally,the effectiveness of the combination of option contract mechanism design and the preference of supply chain members for contracts are analyzed by numerical examples.The results show that the performance of supply chain can be improved only by adopting option contracts between distributors and retailers,but t he global optimization of supply chain performance cannot be achieved.And combination option contracts can make the manufacturer and distributor of profits relative to the decentralized decision making is not damaged at the same time,improve the whole supply chain retailers and profits,and relative to NV-SCCO,the performance of the whole supply chain has also been improved,double marginal effect is weakened,and the combination of option contract the overall supply chain profit more options contract model has a pareto improvement.