Managerial flexibility strategies under supply and demand risks: quantity postponement vs. price postponement

Binwei DONG, Wansheng TANG*, Chi ZHOU

*Corresponding author for this work

Research output: Journal PublicationsJournal Article (refereed)peer-review

1 Citation (Scopus)

Abstract

The stochastic demand and the uncertain supply/yield are common marketing operation risks. To solve these risks, firms usually apply quantity postponement strategy or price postponement strategy to improve supply chain performance. In this paper, we consider a firm’s two-stage decisions model where the firm needs to make the price decision and the quantity decision under both supply and demand risks. And the risks response depending on different postponement strategies is the key factor for the firm. When the firm adopts the quantity postponement strategy, the expected yield is equal to the market demand. Furthermore, the demand risk does not affect the firm’s pricing decision, and the supply risk forces the firm to push up the product’s sale price and to decrease order quantity. However, when the firm adopts the price postponement strategy, the expected yield is higher than market demand which indicates the firm may confront a dilemma of overproduction. Meanwhile, both demand risk and supply risk cause the decrease of order quantity. In terms of the ability of mitigating both supply and demand risks, the two postponement strategies show different performance. The quantity postponement strategy can mitigate the demand risk, but the firm can not mitigate the supply risk by adopting price postponement strategy.

Original languageEnglish
Pages (from-to)1747-1763
Number of pages17
JournalInternational Journal of Machine Learning and Cybernetics
Volume10
Issue number7
Early online date30 Jun 2018
DOIs
Publication statusPublished - Jul 2019
Externally publishedYes

Bibliographical note

This work is supported by the National Natural Science Foundation of China (nos. 71771164 and 71702129), Humanity and Social Science Youth Foundation of Ministry of Education of China (no. 17YJC630232).

Keywords

  • Postponement strategy
  • Supply chain management
  • Uncertain demand
  • Uncertain supply
  • Uncertainty theory

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