Competition and cooperation in a single-retailer two-supplier supply chain with supply disruption

Many retailers diversify their supply disruption risk by sourcing from multiple suppliers. While a retailer's sourcing strategy impacts the profit of the supply chain, the pricing strategies of suppliers influence all aspects of the supply chain. In this paper we investigate the sourcing strategy of a retailer and the pricing strategies of two suppliers in a supply chain under an environment of supply disruption. We characterize the sourcing strategies of the retailer in a centralized and a decentralized system. We derive a sufficient condition for the existence of an equilibrium price in the decentralized system when the suppliers are competitive. Based on the assumption of a uniform demand distribution, we obtain an explicit form of the solutions when the suppliers are competitive. Finally we devise a coordination mechanism to maximize the profits of both suppliers. (C) 2009 Elsevier B.V. All rights reserved.