Managing Emergency Procurement Using Option Contract under Supply Disruption and Demand Uncertainty

Effective and flexible procurement production strategies are capable of alleviating mitigating supply disruption demand risk. Considering the price fluctuation caused by environmental change, we investigate optimal under uncertainty based on option contract in a two-stage chain consisting retailer who has two opportunities supplier emergency chance. We explore value comparing it with decision making no contract. The result shows that ordering can coordinate uncertain environment, improving economic performance whole chain. When probability is high or lower, higher stimulate to produce more products satisfy retailer’s order at low price, which beneficial both, greater. Otherwise, worth for core enterprise. moderate exercise conducive long-term cooperation retailer.