Coordination in a Dual-channel Supply Chain with Production Cost Disruptions

This paper studies a two-stage coordination problem in a one-manufacturer-one-retailer dual-channel supply chain when production cost is disrupted. When a production cost disruption occurs, the original production plan and coordination scheme designed for the initially estimated production cost need to be revised. To resolve these issues, it is necessary to explicitly consider possible related deviation costs caused by any changes of the original production plan. How to model the production cost disruptions and their effects, and how to design a coordination scheme with disruptions is discussed. The results show that the original production plan and quantity discount contract have demonstrated some robustness under disruptions. It is beneficial for the central decision-maker to take timely response to the disruptions and utilize the revised strategy under disruptions. We also find that the optimal pricing decisions are affected by customers' preference for the direct channel and the scale of disruption. Finally, the theoretical results are illustrated by conducting some numerical examples.