Collaborative model of supply chain based on risk sharing under random yields

To reduce upstream supply risks of supply chain, collaborative model of risk sharing policy was studied under the circumstances that the two suppliers-one manufacturer system with random yield when overflow inventory cost existed. First optimal lot sizing was analyzed under centralized decision, then the optimal lot sizing decision under overflow inventory cost was constructed for suppliers and manufacturers respectively. Nash equilibrium was proved to exist between suppliers and manufacturer when overflow inventory cost was considered. The profit of supply chain under Nash equilibrium was no more than that under centralized decision. In order to obtain the optimal profit of the supply chain, supply chain collaborative model based on risk sharing policy under overflow inventory was proposed. Manufacturers shared the risk of suppliers when supplier's effective yield exceeded the order amount. Suppliers shared the risk of manufacturers when suppliers'inconsistent delivery amount led to ultimate yield reduction of manufacturers. Finally case analysis showed that order amount, suppliers'risk sharing coefficient and manufacturer's risk sharing coefficient could be controlled by manufacturers to satisfy certain relationship and then profit of supply chain under decentralized decision could reach the profit under centralized decision.