Coordinating dyadic supply chains when production costs are disrupted

This paper studies a supply chain coordination problem under production cost disruptions. When a production cost disruption occurs, the coordination scheme designed for the initially estimated production cost needs to be revised. To resolve this issue, it is necessary to explicitly consider the possible deviation costs caused by any changes in the original production plan. How to model the production cost disruptions and their impacts, and how to design coordination schemes under disruptions is discussed. Results obtained under various scenarios including the cases of a single retailer and multiple retailers, the cases of linear and nonlinear demand-price functions, and different wholesale policies are presented.