Abstract
This paper considers a three-echelon manufacturer-retailer-supplier supply chain, the purpose of which is to investigate the influence of the bilateral exchange rate risks of import and export and the leading company’s financial hedging on the decision-makers of the supply chain. Firstly, it constructs the profit function and the financial hedging decision-making model of each member in the decentralized supply chain. Secondly, it introduces the incentive mechanism of exchange rate risk hedging in the centralized supply chain. Thirdly, from the perspective of wholesale price agreements and revenue-sharing contracts, it discusses the impact of financial hedging behavior and bilateral exchange rate risks on the decision-making process of each member through mathematical modeling. Finally, it explores the relationships of decision variables through simulation analysis. The results illustrate that (i) for decentralized and centralized decision-making, the manufacturer’s expected profit and profit variance decrease with the increase of the fluctuations of import and export exchange rates under the hedging strategy for exchange rate risks; (ii) compared with the decentralized supply chain, the manufacturer’s expected profit in the centralized supply chain decreases slightly under the revenue-sharing contract; (iii) in the centralized supply chain, if the manufacturer’s risk hedging ratio is high, its profit variance is smaller than that of the decentralized supply chain and the expected profits of the retailer and the supplier will increase significantly; and (iv) for the members of the transnational supply chain, centralized decision-making is better than decentralized decision-making.
Highlights
With the continuous development of international trade, the enterprise supply chain is increasingly characterized by globalization
Existing studies, considering the impact of exchange rate risks on the performance of transnational supply chains, find that transnational enterprises are often unwilling to bear exchange rate risks because it will lead to fluctuations in their profits. erefore, to further reduce the impact of import and export exchange rate fluctuations on the manufacturer’s profit, we introduce the hedging mechanism for exchange rate risks
When each member of the transnational supply chain adopts the revenue-sharing contracts, the exchange rate risks are transmitted to the retailer and the supplier through the benchmark wholesale price of products, the benchmark selling price of raw materials, and the order quantity of the supply chain, affecting their expected profits
Summary
With the continuous development of international trade, the enterprise supply chain is increasingly characterized by globalization. (1) When considering the bilateral exchange rate fluctuations of import and export, what are the impacts of exchange rate risks and leading company’s hedging strategies on the decision-makers in the transnational supply chain?. We consider the bilateral exchange rates of import and export, introduce the incentive mechanism of risk hedging, and construct the financial hedging model of decision-makers in the decentralized and centralized transnational supply chain. E influence of exchange rate fluctuations and financial hedging strategies on decision-makers of the supply chain under wholesale price agreements and revenue-sharing contracts are investigated. We compare the impact of financial hedging behaviors and bilateral exchange rate risks on the decisionmaking process of each member from the perspective of wholesale price agreements and revenue-sharing contracts. The relationships of decision variables are explored through simulation analysis, and the results of the decentralized and centralized decision-making are compared simultaneously
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