Supply chain coordination under demand disruptions with quantity discount contract

In this paper, we investigate the supply chain coordination problem under demand disruptions. By using the quantity discount contract, under some scenario, the two-stage newsvendor supply chain can be coordinated. But this coordination is achieved without considering the effect to the supply chain made by the unforeseeable event. When the unforeseeable event happened, it makes demand disruptions, that is to say, it makes the demand distribution at retailer be substituted by another one and this disruption maybe bring the coordinated supply chain down. We propose the new adjusted quantity discount contract as emergency contract plan for disruptions, which can still coordinate the supply chain under demand disruptions. Some managerial insights are given in order to deal with this demand disruption timely and properly.

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