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Mathematical Problems in Engineering
Volume 2015, Article ID 473212, 10 pages
http://dx.doi.org/10.1155/2015/473212
Research Article

Contract Coordination in Dual Sourcing Supply Chain under Supply Disruption Risk

1Business School, Hunan University, Changsha, Hunan 410082, China
2Academy of Mathematics and Systems Sciences, Chinese Academy of Sciences, Beijing 100080, China
3International Business School, Shaanxi Normal University, Xi’an 710062, China
4Department of Management Sciences, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong
5Office of Humanities and Social Sciences, Hunan University, Changsha 410082, China

Received 26 June 2015; Revised 11 August 2015; Accepted 12 August 2015

Academic Editor: Young Hae Lee

Copyright © 2015 Tong Shu 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 explores a coordination model for a three-echelon supply chain including two different manufacturers, one distributer and one retailer via the combined option and back contracts. And one manufacturer provides the high wholesale price with low supply disruption risk and the other is completely the opposite. This differs from the previous supply chain coordination model. Firstly, supply disruption is added to the three-echelon supply chain. Secondly, considering the coordination of the supply chain, we deploy the combined option and back contracts which are seldom used in the previous study. Furthermore, it is interesting that supply disruption risk and buyback factor do not affect the distributor’s order quantity from the manufacturer who has low product price and unreliable operating ability, while the order quantity increases with the rise of option premium and option strike price. The distributor’s order quantity from the manufacturer, which has high product price and reliable operating ability, increases with the rise of supply disruption risk but decreases when the buyback factor, option premium, and option strike price decrease.