Abstract
The paper develops a multi-product supply chain model where supplyproduction- sale integration is considered and the worst-case conditional value at risk (WCVaR) model is applied as the risk measure, and also provides a coordination strategy to minimize the supply chain risk. First, by analyzing the source demand of market in the supply chain, three WCVaR models consisting of three tiers—the supplier, the manufacturer and the retailer in the supply chain are proposed to measure the market risk. Then, a risk coordination model is proposed to cover the whole supply chain including producing, order, inventory and sales. Finally, the numerical results show the efficiency of the model in mitigating risks. And we make a summary of supply chain risk management strategies.
Highlights
The early research on integrative supply chain focused on the condition of certain demand with problems solved by integer programming models
The paper develops a multi-product supply chain model where supplyproduction-sale integration is considered and the worst-case conditional value at risk (WCVaR) model is applied as the risk measure, and provides a coordination strategy to minimize the supply chain risk
By analyzing the source demand of market in the supply chain, three WCVaR models consisting of three tiers—the supplier, the manufacturer and the retailer in the supply chain are proposed to measure the market risk
Summary
The early research on integrative supply chain focused on the condition of certain demand with problems solved by integer programming models. Zhou et al [11] proposed an optimal order model for multi-product problems, which is formulated as a linear programming problem subject to CVaR constraints and offers an appropriate analytical tool for decision-makers with different risk preferences. On this basis, we would like to have the concept of WCVaR, which was introduced by Zhu et al [12] for the situation where the probability distribution are partially known; it is proved that the WCVaR inherits the same properties of the CVaR such as the coherency and the convexity, which makes risk analysis available and makes it an effective tool for supply chain risk measurement. The paper is organized as follows: Section 2 studies three market risk models and proposes the coordination model with the robust optimization models via WCVaR; in Sections 3, the numerical examples are presented to test the models and the theoretical analysis; Section 4 draws some conclusions
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