Risk Analysis For Suppliers:Suppliy Contract With Bidirectional Options And Suppliy Contract With Duoptions

As the market competition becomes more and more fierce,the traditional inflexible supply chain for innovative products has been unable to meet the market demand.For example,newsvendor model(NV)will lead to a poor performance of the supply chain,when applied for the innovative products with long lead-time,short selling season and high demand uncertainties.In order to solve the above problem,many scholars have proposed different flexible supply contracts.In this paper,we study two flexible supply contracts with bidirectional options(SCBO)and duoptions(SCDO)respectively with the focus on supplier's expected profit and risk under a single-period two-stage supply chain with single supplier and single retailer.The option contract essentially transfers partial risk associated with demand uncertainty from the buyer to the supplier,which may result in a lower profit for supplier than NV model.Therefore,we regard NV model as benchmark and introduce two parameters,risk indicator and risk probability,for risk analysis,and then illustrate the effects of different parameters on the supplier's decision-making and risk in the numerical analysis in order to provide supply chain decision-makers with management reference.Finally,we get the following conclusions with the above analysis: Although the flexibility of SCBO and SCDO can improve the value of the contract,the cost for such flexibility will result in the risk that the supplier's profit is lower than NV model contract.When the retailer's salvage value is high,the possibility of the SCBO risk is high for supplier,but the maximum risk associated with lower profit will decrease.When the supplier has a high salvage value,the possibility of the risks and the maximum risk is small for the supplier in both SCBO and SCDO.When the shortage cost is higher,the supplier will have lower probability of risk and the maximum risk of SCDO.Moreover,the risk probability of SCDO model is lower than that of SCBO model.