Discrete Dynamics in Nature and Society
Volume 2013 (2013), Article ID 484062, 12 pages
http://dx.doi.org/10.1155/2013/484062
Research Article

Coordination in a Single-Retailer Two-Supplier Supply Chain under Random Demand and Random Supply with Disruption

Fei Hu,1 Cheng-Chew Lim,2 Zudi Lu,3 and Xiaochen Sun1

1Department of Mathematics, School of Science, Tianjin University, Tianjin 300072, China
2School of Electrical and Electronic Engineering, The University of Adelaide, Adelaide, SA 5005, Australia
3School of Mathematical Sciences, The University of Adelaide, Adelaide, SA 5005, Australia

Received 17 October 2012; Accepted 29 December 2012

Academic Editor: Xiang Li

Copyright © 2013 Fei Hu et al. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper studies the coordination issue of a supply chain consisting of one retailer and two suppliers, a main supplier and a backup supplier. The main supplier’s yield is subject to disruption and the retailer faces a random demand. We determine the retailer’s optimal ordering policy and the main supplier’s production quantity that maximize expected profit of the centralized supply chain. We also analyze the decentralized scenario, and a combination of overproduction risk sharing and buy-back contracts with a side payment from/to the backup supplier is provided to coordinate the supply chain. Numerical examples are given to gain some qualitative insights.