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- Title
Dynamic mitigation strategy for stock-outbased on joint compensation and procurement.
- Authors
Li Shanshan; He Yong
- Abstract
Combining compensating customers and emergency sourcing, a type of dynamic mitigation strategy is proposed to deal with supply disruptions. When a stock-out occurs, the retailer can control backorders by the compensation level, and meet demand through an emergency source along with a high price. The unsatisfied customers decide to backorder or quit orders depending on the compensation level, the waiting time, and the customers' patience. By dynamically capturing customers' post-disruption reactions, an optimal control model is formulated to minimize the cost incurred by the supply disruption. Solving the model, the optimal reactive strategy is proposed in six patterns: a pure sourcing, a pure compensation, a mixed policy, a mixed policy-pure sourcing, a mixed policy-pure compensation, and a pure compensation-mixed policy, mainly depending on the compensation cost, the disruption length, and the customers' patience. The strategies analytically indicate how to properly change the compensation level and sourcing quantity as the disruption continues. The conditions for effectively using each strategy are provided as well.
- Subjects
STOCKS (Finance); RETAIL industry; CONSUMERS; PATIENCE; COMPENSATORY balances
- Publication
Journal of Southeast University (English Edition), 2019, Vol 35, Issue 4, p509
- ISSN
1003-7985
- Publication type
Article
- DOI
10.3969/j.issn.1003-7985.2019.04.014