Supply Chain Coordination Strategy under Demand Disruption–based on ABD Contracts

This paper considers the coordination problem of one-retailer one-supplier supply chains with stochastic demand and demand disruption. Adopted optimization methods and numerical experiments, we evaluate the benefits of the ABD contracts with and without demand disruption, and characterize the optimal discount price that maximizes the supplier’s expected profit under such circumstance. The results suggest that supply chain coordination can be achieved by advance booking discount contract under normal circumstances (without demand disruption) and under demand disruption situations. Unlike other coordination mechanisms, it does not need to devise an anti-disruption contract and change the parameters of the original contract, that is, the original ABD contract can coordinate the supply chain with or without demand disruption, so ABD contract is more robust and simple to implement. Further, by ABD contract, the supplier can share the deviation penalty costs with the retailer, and meanwhile acquire the total profits generated by at-once orders. At last, we give the conclusions and discuss the future direction.