Risk Analysis Of Flexible Supply Contract With Duoptions For Buyers

A flexible supply contract with duoptions (SCDO) has been introduced into a single-period two-stage supply chain with single-supplier and single-buyer. On the basis of this study, this paper analyzes the risk of duoptions.But we find that, even if providing a higher expected profit at the first stage, SCDO may have risks associated with a worse performance later compared with the traditional newsvendor contract model. This is due to the long lead-time and the high demand uncertainty.This paper derives two important parameters to estimate the risks of introducing SCDO, one is risk indicator to estimate whether SCDO causes risks or not. Another is a risk ratio to represent the probability of the risks.At last, this paper illustrates the effects of some factors on the buyer's behavior and profit difference between both models by a numerical study.