Uncertainty and contract flexibility in automotive supply chains: a simulation model

Abstract

Supply chains are vulnerable to uncertainties in demand and supply. Such uncertainties are often responsible for failure of contracts between buyers and suppliers. Flexible provisions in contracts are likely to reduce the adverse effect of uncertainties on the supply chain effectiveness. The present paper proposes a framework for buyers and suppliers to introduce flexibility in their contracts to address uncertainty in demand and supply. The framework has been developed by simulating various demand and supply situations in the context of automotive supply chains. This framework also aims at identifying variables of a contract which the pair can negotiate and deliver seamlessly.