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We consider a decentralized supply chain comprised of one manufacturer and one retailer where the manufacturer has random yield, and the retailer faces uncertain demand. To guarantee product availability, the retailer requires a service level of the product supply from the manufacturer. However, we determine that the high service level indeed benefits the retailer whereas causes the manufacturer’s...
We consider a manufacturer facility where the assembly of a product needs a critical component. The production of the component faces random yield. To prevent the shortage, the manufacturer can also purchase the component from another supplier with an option contract. According to the contract, a certain quantity of components can be reserved with a reservation price per unit, and an execution price...
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