English, Article edition: Selection of contract suppliers under price and demand uncertainty in a dynamic market Li, Shanling; Murat, Alper; Huang, Wanzhen

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Selection of contract suppliers under price and demand uncertainty in a dynamic market
Author
  • Li, Shanling
  • Murat, Alper
  • Huang, Wanzhen
Physical Description
  • article
Notes
  • In this paper, we consider a supply contracting problem in which the buyer firm faces non-stationary stochastic price and demand. First, we derive analytical results to compare two pure strategies: (i) periodically purchasing from the spot market; and (ii) signing a long-term contract with a single supplier. The results from the pure strategies show that the selection of suppliers can be complicated by many parameters, and is particularly affected by price uncertainty. We then develop a stochastic dynamic programming model to incorporate mixed strategies, purchasing commitments and contract cancellations. Computational results show that increases in price (demand) uncertainty favor long-term (short-term) suppliers. By examining the two-way interactions of contract factors (price, demand, purchasing bounds, learning and technology effect, salvage values and contract cancellation), both intuitive and non-intuitive managerial insights in outsourcing strategies are derived.
  • Supply chain contracts Stochastic dynamic programming Purchasing Supplier selection
  • RePEc:eee:ejores:v:198:y:2009:i:3:p:830-847
Language
  • English
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