Abstract
The severe impacts of disruptive events on real-world supply chains have attracted the researcher’s attention on supply chain disruptions in the last decade. In the related literature, several strategies aimed at reducing the impact of disruptions have developed and analyzed. However, there exists no study which analyzes the effectiveness of pricing strategies in presence of disruptions on real-world supply chains to the best of our knowledge. Within this scope, a dynamic pricing approach is developed to mitigate stock-out risks aroused from disruptions. The rationale behind the proposed approach is to channel customer demand from a scarce product to a substitute product. The proposed approach is implemented in a retail supply chain. The computational results confirm the effectiveness of the dynamic pricing policy in the presence of disruptions.
Highlights
Chain disruption is the outcome of a process whereby one or more adverse events taking place at a particular location in a supply chain which impact on the performance of one or more locations in the supply chain
The effectiveness of the proposed dynamic pricing mechanism is analyzed by using a simulation model
The optimal values for pricing and inventory control parameters are identified by a simulation-based optimization approach
Summary
Chain disruption is the outcome of a process whereby one or more adverse events taking place at a particular location in a supply chain which impact on the performance of one or more locations in the supply chain. Several studies which develop models for disruptive events and their consequences, and mitigation strategies are published. The related literature lacks a quantitative study which employs the dynamic pricing strategy against disruptions. There are a few studies that consider pricing strategies in presence of disruptions. Chao [12] characterized the optimal ordering and pricing policies for a dual sourcing system with disruptions and random price-sensitive demand Huang, He [13] developed a Stackelberg model in presence of production disruptions for a food supply chain to obtain inventory, pricing and preservation decisions. A dynamic pricing strategy concerning inventory levels is applied to a multi-commodity supply chain system in presence of disruptions.
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