Demand Disruption Management for Supply Chain System with Quantity Discount Contract

For a one-supplier-one-retailer supply chain who faces stochastic market demand, it can be coordinated with quantity discount contract. The purpose of this paper is to investigate the supply chain that experiences a demand disruption during the planning horizon. First, we show that the coordination may be broken off by an emergent event, which make the demand disruptions, that is, it makes the demand distribution different from the assumption needs to achieve original supply chain´s coordination. Second, we show that changes to the original plan induced by an emergent event may impose considerable deviation costs throughout the system and make the supply chain uncoordinate. We derive conditions that indicate when the maximum profit can be achieved. Then, an optimal strategy for supply chain to the disruptions by quantity discount contract is presented. Last, an adjusted quantity discount contract which has antidisruption ability is proposed, and it can be used as an effective scheme to coordinate supply chain in a large range of situations