Risk Sharing Contract In Capacity Investment for Two-Echelon Supply Chain

2021 ◽  
Vol 47 (6) ◽  
pp. 479-489
Author(s):  
Pyung-Hoi Koo
Keyword(s):  
Supply Chain ◽  
Risk Sharing ◽  
Capacity Investment

Supply Chain Coordination for E-Commerce: Risk Penalty vs. Flat Rate

2021 ◽  
Author(s):  
Ju Myung Song ◽  
Yao Zhao
Keyword(s):  
Supply Chain ◽  
Information Asymmetry ◽  
Risk Sharing ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
Problem Definition ◽  
Third Party ◽  
Common Belief ◽  
Shipping Industry ◽  
Flat Rate

Problem definition: We study the coordination of an E-commerce supply chain between online sellers and third party shippers to meet random demand surges, induced by, for instance, online shopping holidays. Academic/practical relevance: Motivated by the challenge of meeting the unpredictable demand surges in E-commerce, we study shipping contracts and supply chain coordination between online sellers and third party shippers in a novel model taking into account the unique features of the shipping industry. Methodology: We compare two shipping contracts: the risk penalty (proposed by UPS) and the flat rate (used by FedEx), and analyze their impact on the seller, the shipper, and the supply chain. Results: Under information symmetry, the sophisticated risk penalty contract is no better than the simple flat rate contract for the shipper, against common belief. Although both the risk penalty and the flat rate can coordinate the supply chain, the risk penalty does so only if the shipper makes zero profit, but the flat rate can provide a positive profit for both. These results represent a new form of double marginalization and risk-sharing, in sharp contrast to the well-known literature on the classic supplier-retailer supply chain, where risk-sharing contracts (similar to the risk penalty) can bring benefits to all parties, but the single wholesale price contract (similar to the flat rate) can achieve supply chain coordination only when the supplier makes zero profit. We also find that only the online seller, but not the shipper, has the motivation to vertically integrate the seller-shipper supply chain. Under information asymmetry, however, the risk penalty brings more benefit to the shipper than the flat rate, but hurts the seller and the supply chain. Managerial implications: Our results imply that information plays an important role in the shipper’s choices of shipping contracts. Under information symmetry, the risk penalty is unnecessarily complex because the simple flat rate is as good as the risk penalty for the shipper; moreover, it is better for the seller-shipper coordination. However, under information asymmetry, the shipper faces additional shipping risk that can be offset by the extra flexibility of the risk penalty. Our study also explains and supports the recent practice of online sellers (e.g., Amazon.com and JD.com), but not shippers, to vertically integrate the supply chain by consistently expanding their shipping capabilities.

scholarly journals Evolutionary Game Dynamics for Financial Risk Decision-Making in Global Supply Chain

Complexity ◽  
2018 ◽  
Vol 2018 ◽  
pp. 1-10 ◽  
Author(s):  
Zhi Li ◽  
Guanghao Jin ◽  
Shen Duan
Keyword(s):  
Supply Chain ◽  
Risk Sharing ◽  
Financial Risk ◽  
Evolutionarily Stable Strategy ◽  
Evolutionary Game ◽  
Global Supply Chain ◽  
Risk Environment ◽  
Theory Analysis ◽  
Supply Chain System ◽  
Cooperation Strategy

This paper focuses on the game evolution process and its influencing factors of financial risk cooperation behavior between suppliers and manufacturers in global supply chain system. Using two-population evolutionary game theory, the performance of supply chain members under financial risk environment is modeled. Further, the proposed financial risk game model is applied to simulation cases of global supply chain. Based on the theory analysis and simulation results, it is shown that the cooperation strategy is the optimal evolutionarily stable strategy (ESS) for all supply chain members, when facing the high financial risk. The financial risk-sharing coefficient can be regarded as an adjuster that affects risk ESS of both suppliers and manufacturers under the low financial risk setting. By reducing the financial risk-sharing ratio of one supply chain player, his intention of adopting cooperation strategy would be enhanced. Finally, it is observed that financial risk sharing approach may lead to the alignment among supply chain members. Therefore, setting up an effective financial risk-sharing mechanism is beneficial to realize sustainable development of global supply chain.

Managing transaction risks in interdependent supply chains: an extended transaction cost economics perspective

2012 ◽  
Vol 12 (3) ◽  
pp. 243-260 ◽  
Author(s):  
Mark Wever ◽  
Nel Wognum ◽  
Jacques Trienekens ◽  
Onno Omta
Keyword(s):  
Risk Management ◽  
Supply Chain ◽  
Supply Chains ◽  
Transaction Cost ◽  
Risk Sharing ◽  
Transaction Cost Economics ◽  
Management Strategies ◽  
Risk Minimization ◽  
Risk Management Strategies ◽  
Supply Chain Orientation

The present study examines the management of transaction risks in supply chains. Risk management studies often ignore the wider supply chain context in which individual transactions take place. However, risk management strategies which are suitable to use when only a single transaction is considered may be inappropriate when other transactions in the supply chain are taken into account. This study addresses this issue by examining: (1) how risks arise as a result of interdependencies between the various transactions making up the supply chain; and (2) what types of contractual-based strategies actors can use to manage their risk exposure. To realize these aims, the study applies an extended Transaction Cost Economics (TCE) framework with a supply chain orientation. The framework illustrates how different types of interdependencies - pooled, sequential and reciprocal - expose companies to different sources of risk. Three strategies companies can use when facing barriers to risk minimization in sequentially interdependent supply chains are analyzed: risk transferring, risk altering and risk sharing. Examples from the agri-food sector are discussed to demonstrate the functioning of these strategies.

Optimizing capacity investment on renewable energy source supply chain

2017 ◽  
Vol 107 ◽  
pp. 57-73 ◽  
Author(s):  
Jiaping Xie ◽  
Zhong Li ◽  
Yu Xia ◽  
Ling Liang ◽  
Weisi Zhang
Keyword(s):  
Energy Source ◽  
Renewable Energy Source ◽  
Supply Chain ◽  
Renewable Energy ◽  
Capacity Investment

scholarly journals RISKY MULTI-CRITERIA GROUP DECISION MAKING ON GREEN CAPACITY INVESTMENT PROJECTS BASED ON SUPPLY CHAIN

2017 ◽  
Vol 18 (3) ◽  
pp. 355-372 ◽  
Author(s):  
Yan SONG ◽  
Shuang YAO ◽  
Donghua YU ◽  
Yan SHEN
Keyword(s):  
Decision Making ◽  
Supply Chain ◽  
Group Decision Making ◽  
Group Decision ◽  
Cloud Model ◽  
Decision Makers ◽  
Capacity Investment ◽  
Decision Matrix ◽  
Investment Projects ◽  
Green Capacity

Green capacity investment projects have rapidly emerged involving suppliers, customers, and manufacturing organizations in supply chain systems with environmental challenges. This paper focuses on and identifies both primary strategic and operational elements that will aid managers in evaluating and making risky multi-criteria decisions on green capacity investment projects. We propose a cloud prospect value consensus process consisting of feedback and adjustment mechanisms that provide modification instructions to the corresponding decision makers for a decision matrix based on the cloud model and prospect theory, which considers psychological behavior, disagreements between decision makers, and the ambiguity of linguistic variable assessment across multi-criteria risks. The new model increases the efficiency and accuracy of decision making. To verify the feasibility and validity of the Cloud Prospect Value Consensus Degree based on the Feedback adjustment mechanism, its performance is compared with three state-of-the-art multi-criteria group decision-making methods.

Sign in / Sign up

Export Citation Format

Share Document