Comparative Study On Put Option Contracts And Buy-Back Contracts In Non-Flexible Supply Chains

In the face of the unstable and complicated market environment,with long lead times and short sales periods‘ enterprises needs the appropriate contracts to improve their profits and remain the competitive power.Buy-back contracts is to encourage retailer to order more products at the beginning of the sales,the supplier is willing to commit to buy back the surplus products when the market demand is higher than the orders,which also achieves the perfect effects of risk sharing and profit increasing.The put option contract is mainly based on the newsvendor model,The put option contracts refers to the retailer pays a certain amount of premium to the supplier,and supplier will purchase some options when the market forecast updated.,because after the second update of the market forecast,retailers can flexibly decide their actual purchase quantity according to the options quantity.In modern supply chain management,as two kinds of supply chain contracts with similar ideas,they are designed to coordinate the same situation that the actual demand may be greater than the order quantity,and have been proved to be able to effectively coordinate the traditional supply chain.In this paper,I will use the literature research,mathematical formulation of mathcad and subsequent numerical analysis to answer this question.However,the final comparison results show that the two types of contracts are welcomed differently from the variety of positions,and also shows that they have different applicability with the change of relevant parameters.In a word,by providing a comprehensive comparison for these two contracts,it will be furtherly enrich the research of supply chain contracts,and constantly move forward the study of supply chain management contract design.Firstly,this paper introduced a partial buy-back contracts,it can be divided into three situations: non,partial and full.The results shows that the order quantity of this kind of contract decreases with the increase of the proportion of partial buyback.When the proportion of partial buyback?exceeds a certain value,the order quantity will be less than the put option contracts?order quantity,and the corresponding retailer profit will be less,too.The study also found that the three kinds of coordinate contracts has different effects for the profit growth of suppliers and retailers.The traditional buyback contracts had the largest profit growth for retailers,followed by partial buyback contracts and flexible supply chain of put option contract is the final one.Suppliers prefer supply chain of put option contract to increase their profit,followed by the partial buyback contracts,and the fianl one is traditional buyback contracts.Through numerical analysis,it is found that When comparing the two buyback contracts and put option contract in this paper,the traditional buyback contract is the better choice when the buyback price is high,the demand fluctuation is greatly and the cost of lost-sales is little.When the proportion of partial buyback and the residual value price of retailer is little and the buyback price is high,the partial buyback contract is a better choice.The put option contract is a better choice than the buyback contract when the retailer's residual value price and the shortage price is little,the demand fluctuation is little and the option execution price is high.