Supply Chain Coordination under Supply Delay Based on Buy-back Contract

An optimal ordering model under supply delay in a two-stage supply chain based on buy-back contract is presented. It is showed that the buy-back contract can coordinate the supply chain under the case of supply delay with a lower buy-back price compared to the case without supply delay. Furthermore,. we analyze how the probability of supply delay influences the supply chain. The results show that the buy-back price, optimal ordering quantity and expected profit of the supply chain system are decreasing in the probability of supply delay. The retailer's expected profit is non-monotonic to the probability of supply delay and the supplier's expected profit is decreasing in the probability of supply delay.