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Push, Pull, and Supply Chain Risk‐Averse Attitude
Author(s) -
Yang Lei,
Cai Gangshu George,
Chen Jian
Publication year - 2018
Publication title -
production and operations management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.279
H-Index - 110
eISSN - 1937-5956
pISSN - 1059-1478
DOI - 10.1111/poms.12881
Subject(s) - cvar , newsvendor model , supply chain , microeconomics , risk neutral , profit (economics) , pareto principle , business , supply chain risk management , order (exchange) , revenue sharing , tariff , economics , supply chain management , expected shortfall , industrial organization , service management , risk management , operations management , finance , marketing , international trade
The literature has shown that supply chain performance is affected by the allocation of inventory risk. Traditionally, a pull supply chain generates a higher optimal order quantity and hence higher supply chain profit than a push supply chain when firms are risk neutral. Extended from the classic push and pull newsvendor models, this study investigates the impact of firms’ risk‐averse attitudes on supply chain performance. Based on firms’ conditional value‐at‐risk ( CVaR ), our analysis indicates that push can lead to a higher optimal order quantity than pull when the supplier is sufficiently more risk averse than the retailer. Meanwhile, pull contracts cannot always survive push challenge like in risk‐neutral supply chains. We demonstrate that three‐part tariff revenue sharing and buy‐back contracts can coordinate both the push and the pull supply chains to achieve the Pareto optimality maximizing combined supply chain CVaR .