Buyer-supplier currency exchange rate flexibility contracts in global supply chains

This paper analyzes a decentralized global supply chain under newsvendor setting, where supplier delivers certain quantity of single product to buyer in accordance with the terms mutually agreed upon contract. contract is signed prior delivery and subsequent payment, thus, exposing risk currency exchange rate fluctuations. We propose two types flexibility contracts explore characteristics mitigation policies for supplier. Furthermore, we investigate effects structures on optimal order quantity, as well expected profits both members. Our results show that decreases when wholesale price uncertain due volatility. Also, our proposed tend improve supplier, payment made supplier’s currency, indicating desirability adopting such contractual agreements from perspective parties. On other hand, buyer’s suggested do not yield win-win scenarios. Finally, examine effectiveness availing services local vendor, which capable satisfying any demand excess ordered foreign source short notice, mitigate risks associated an overseas order.