Skip to main content
SpringerLink
Log in

An option contract on emergency material reserve considering quality catastrophic change

  • Special Issue
  • Published:
Evolutionary Intelligence Aims and scope Submit manuscript

Abstract

This paper investigates an option contract for emergency material reserve because of quality catastrophic change. The quality catastrophic change happens randomly and the realized number can not be observed until it happened. Thus, it is necessary to reserve some emergency material beforehand. However, the demander is not qualified to make the storage. Meanwhile, the supplier has no motivation to make storage for the demander. Thus, an option contract is proposed to encourage the supplier to make backup for the demander and share the shortage cost if the backup less than the realized option order quantity. Three models are discussed: the centralized model without option, the decentralized model without option, and the decentralized model with option. The results demonstrate that the order quantity for the first time under the centralized scenario is greater than that under the decentralized model without option. And, the order of the purchase quantity for the first time under the three scenarios depend on the parameters decided by the both players. Meanwhile, through analysing, the effective range of option fee is proved to be limited to an interval.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. Bimpikis K, Candogan O, Ehsani S (2019) Supply disruptions and optimal network structures. Manag Sci 65(12):5504–5517. https://doi.org/10.1287/mnsc.2018.3217

    Article  Google Scholar 

  2. Pi Z, Fang W, Zhang B (2019) Service and pricing strategies with competition and cooperation in a dual-channel supply chain with demand disruption. Comput Ind Eng. https://doi.org/10.1016/j.cie.2019.106130

    Article  Google Scholar 

  3. Bier T, Lange A, Glock C (2019) Methods for mitigating disruptions in complex supply chain structures: a systematic literature review. Int J Prod Res. https://doi.org/10.1080/00207543.2019.1687954

    Article  Google Scholar 

  4. Pavlov A, Ivanov D, Werner F, Dolgui A, Sokolov B (2019) Integrated detection of disruption scenarios, the ripple effect dispersal and recovery paths in supply chains. Ann Oper Res. https://doi.org/10.1007/s10479-019-03454-1

    Article  Google Scholar 

  5. Chopra S, Reinhardt G, Mohan U (2007) The importance of decoupling recurrent and disruption risks in a supply chain. Nav Res Log 54(5):544–555. https://doi.org/10.1002/nav.20228

    Article  MathSciNet  Google Scholar 

  6. Yang Z, Aydın G, Babich V, Beil D (2009) Supply disruptions, asymmetric information, and a backup production option. Manag Sci 55(2):192–209. https://doi.org/10.1287/mnsc.1080.0943

    Article  Google Scholar 

  7. Hou J, Hu X (2015) Comparative studies of three backup contracts under supply disruptions. Asia-Pac J Oper Res. https://doi.org/10.1142/S0217595915500062

    Article  MathSciNet  Google Scholar 

  8. Snyder L, Atan Z, Peng P, Rong Y, Schmitt A, Sinsoysal B (2016) OR/MS models for supply chain disruptions: a review. IIE Trans 48(2):89–109. https://doi.org/10.1080/0740817X.2015.1067735

    Article  Google Scholar 

  9. Tian J, Ge Y, Hou C (2014) Government-driving emergency supplies procurement model based on real option contract. Syst Eng Theory Pract 34:1590–2582

    Google Scholar 

  10. Wang X, Li F, Liang L, Huang Z, Ashley A (2015) Pre-purchasing with option contract and coordination in a relief supply chain. Int J Prod Econ 167:170–176. https://doi.org/10.1016/j.ijpe.2015.05.031

    Article  Google Scholar 

  11. Shang W (2015) Coordination by option contracts with price discount for supply chains with related demand. J Syst Eng 30(6):804–820

    Google Scholar 

  12. Hu Z, Tian J, Feng G (2019) A relief supplies purchasing model based on a put option contract. Comput Ind Eng 153:253–262. https://doi.org/10.1016/j.cie.2018.12.015

    Article  Google Scholar 

  13. Rahimi-Ghahroodi S, Al Hanbali A, Zijm W, Timmer J (2019) Emergency supply contracts for a service provider with limited local resources. Reliab Eng Syst Safe 189:445–460. https://doi.org/10.1016/j.ress.2019.04.027

    Article  Google Scholar 

  14. Sun G, Yang B, Yang Z, Xu G (2019) An adaptive differential evolution with combined strategy for global numerical optimization. Soft Comput. https://doi.org/10.1007/s00500-019-03934-3

    Article  Google Scholar 

  15. Chen Y, Liu Y (2018) A new equilibrium optimization method for hybrid uncertain decision-making system. J Uncertain Syst 12(3):224–240

    Google Scholar 

  16. Lan Y, Yan H, Ren D, Guo R (2019) Merger strategies in a supply chain with asymmetric capital-constrained retailers upon market power dependent trade credit. Omega-Int J Manag S 83:299–318. https://doi.org/10.1016/j.omega.2018.08.009

    Article  Google Scholar 

Download references

Acknowledgements

This work was supported by Philosophy and Social Science Foundation of Tianjin (No. TJGL16-009Q).

Funding

This work was supported by Philosophy and Social Science Foundation of Tianjin (No. TJGL16-009Q).

Author information

Authors and Affiliations

  1. College of Economics and Management, Tianjin University of Science and Technology, Tianjin, 300222, China

    Guoli Wang & Junyan Wang

  2. State Grid Jibei Electric Power CO. LTD. Material Branch, Beijing, 100075, China

    Min Ma, Jingyi Wang & Hong Xue

Authors
  1. Guoli Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Min Ma
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Jingyi Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Hong Xue
    View author publications

    You can also search for this author in PubMed Google Scholar

  5. Junyan Wang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Guoli Wang.

Ethics declarations

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Wang, G., Ma, M., Wang, J. et al. An option contract on emergency material reserve considering quality catastrophic change. Evol. Intel. 17, 37–44 (2024). https://doi.org/10.1007/s12065-020-00371-2

Download citation

  • Received:

  • Revised:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12065-020-00371-2

Keywords

Search

Navigation