Modeling and optimization of two-stage procurement in dual-channel supply chain

Abstract

An online marketing platform should be designed to fairly take the benefits of buyers and suppliers into consideration based on their risk preferences and business strategies. In this paper, the dual-channel supply chain models are developed to implement the risk-averse strategy for buyers and risk-neutral strategy for suppliers, respectively. The buyers under the consideration are the manufacturers who acquire raw materials, parts, or components to make their final products. The major factors in the developed models include the risk preferences of buyers and suppliers, random price fluctuations of goods, and varying demands of final products. To reflect the purchasing practice of a manufacturer, (1) a supply chain is considered to have two supply channels, i.e., contract-based purchase with a lead-time before the goods are used and a direct purchase from online spot markets when the goods are used; (2) the time factor on decision making is specially taken into account, and the procurements are divided into the contract stage of purchase and online stage of purchase. Gaming analysis is conducted to develop the supply chain models for manufactures and suppliers to implement their purchasing or pricing strategies. The simulation is conducted and the result has shown that two-stage purchases in a dual-channel supply chain have improved the performances of suppliers and manufacturers in terms of the profits they can make, their supply---demand relations, and their adjustability to uncertainties in globalized and segmented markets. The proposed model has its significance for manufacturers to better control the price risk of goods and the demand risk of final products; on the other hand, suppliers can benefit from adjusting dynamic sales using online spot markets.