The Study Of Supply Chain Procurement Ordering Strategy Based On Option Contracts

With the rapid development of economic globalization and the increasingly competitiveenvironment, the focus of competition between different enterprises have already changed frommarket share to multilateral supplier. Besides, the demand of customer has gradually tended toindividualism, as well the uncertainty of market is gradually increasing. The management andorganizational structure of the enterprises have already changed greatly. In the conventionalpractice, the members of supply chain belong to different economic entities, they may maximizetheir revenue to make decisions, which would cause the performance declined of the entire supplychain.Both domestic and foreign companies try to reinforce their internal management in order toreduce costs and increase revenue. On the other hand, with the guidance of "horizontalintegration", the company can use supply chain management to reduce its transaction costs andimprove the efficiency of the whole supply chain. Supply chain management can not only improvethe agility of companies and response the customer’s demand quickly, but also build a new patternwhich can share information and risk between members of the supply chain.Procurement has play a very significant role in the supply chain activities, it can beconsidered as a bridge which can communicate producing and cooperation between rawmaterials and semi-finished products. In the cost structure of domestic company, the cost ofprocurement account for more than60%.Therefore, reducing the cost of procurement has becomeone of the important issues of procurement management. Recently, many experts and scholarsboth in domestic and foreign countries have gradually regarded procurement as a key issue, whichcan impact the performance of supply chain and promote the coordination of supply chain.On the basic description of supply chain and procurement management, the paper hasanalyzed the procurement management under supply chain environment. Then it has introducedthe supply chain options and summarized the applicance. Based on the theory, firstly, we can buildand analyze the model with no option contract.Secondly, it has described the option contract and established the model of one supplier and one retailer, which are considered the order strategy of supplier and retailer both on call option anddouble option. Then, the paper has extended to another model of one retailer and two supplier.Finally, it has used the option contract into a company in order to analyze the advantages ondaily procurement activities. In the retailer-led supply chain, the paper has discussed theretailer s order policies whether in the situation of disruptions or not.The study of supply chain procurement ordering strategy based on option contracts has greatsignificance for procurement,it can enhance the development of supply chain and promote theefficiency of procurement.