Two-stage flexible supply contract with payback and information update
Résumé
In this paper we consider a two-stage supply contract model for advanced reservation of capacity, with payback option at the beginning of the selling horizon. Between the two decision stages, an external information is collected that serves to update the demand forecast and permits to adjust the decisions of the first stage by exercising options or by returning some units to the supplier. This type of contracts apply in the case of products with short life cycle. For this type of products, the demand occurs during a single selling period (season). At the end of the period, the remaining inventory, if any, is sold (or returned to the supplier) at a salvage value that is usually less than the initial unit production/procurement cost. During the selling season, any satisfied demand is charged with a unit selling price, and any unsatisfied demand is lost and a penalty shortage cost is paid. The objective of the model is to determine the quantities to be ordered before the beginning of the selling season which can be interpreted as the amount of capacity to be reserved, in order to satisfy optimally the demand.