Study on Supply Chain Disruption Management under Service Level Dependent Demand

This paper studied pricing, service level, and production quantity decision problems in a supply chain with one manufacturer and one retailer under demand and production cost disruptions. The joint impact of demand and production cost disruptions on optimal pricing, service level, and production decisions in centralized and decentralized supply chain was analyzed, respectively. By solving the optimization problem, the optimal decisions of the supply chain were obtained under different demand and production cost disruptions scenarios. It is found that the original production quantity and demand-stimulating service level exhibit some robustness under disruptions in both centralized and decentralized supply chains, while the original optimal pricing does not. In centralized supply chains, it is always beneficial for the central decision-maker to knowing of the accurate information of disruptions. However, sharing disruption information is not always beneficial for both the manufacturer and retailer in decentralized supply chain.