Coordination mechanisms of a three-layer supply chain under demand and supply risk uncertainties

This paper considers a newsvendor model for single product to focus on the importance of coordination under demand and supply uncertainties where raw materials are procured from two unreliable suppliers without any emergency resource; main supplier (which is cheaper but more unreliable) prone random disruption and, therefore, it can satisfy all or nothing buyer’s order, while backup expensive less yield only fraction order. From numerical results, we observe that would be optimal over-utilize under-utilize if maximum growth in risk results disruption. On other hand, when occurs mainly due increase risk, mitigation strategy use decrease supplier. We propose price contract new revenue sharing mitigate decentralized model, fully coordinate chain with win–win outcome entities involved chain.