Newsvendor model for a dyadic supply chain with push-pull strategy under shareholding and risk aversion

Abstract

This paper investigates the optimization and coordination problem in the framework of classic push and pull newsvendor models under shareholding and CVaR criterion. A decentralized supply chain consisting of upstream supplier and the downstream manufacturer is considered. Firstly, taking the risk aversion into account, the optimal decision-makings are investigated under shareholding in push, pull supply chain respectively. By comparison it is found that the optimal order or production quantity depends on the degree of member’s risk aversion and shareholding ratio. Furthermore, the combined contracts are designed to coordinate the supply chain and optimal coordination parameters are obtained. Besides, the impacts of risk-averse preference and the shareholding fraction on supply chain performance are also investigated. The results indicate that in push supply chain the optimal ordering increases in the risk-averse parameter of the downstream manufacturer and the percentage of shares held by the upstream supplier in the downstream manufacturer. However, the optimal wholesale price makes the opposite change. In pull supply chain, the optimal production quantity is independent of the shareholding fraction and decreases with regards to the supplier’s risk aversion. Lastly, some numerical examples are given to illustrate the theoretical results and some suggestions to supply chain management are also provided.