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In this paper, we consider a make-to-stock producti-on-inventory system where a manufacturer's production may be entirely interrupted due to a supply disruption. Customers react dynamically to the subsequent inventory shortage, depending on factors including market condition, customer characteristic, and behavioral interaction. The manufacturer can adopt contingent sourcing to manage the disruption. Consequently, the postdisruption demand and inventory exhibit complicated dynamics in terms of customer behavior, demand recovery, and the adoption of contingent sources. We first model and forecast the postdisruption customer behavior. Customers are classified into two types based on brand loyalty and the interaction is captured as “demand learning” within each type. Using differential models, we analytically characterize customers’ postdisruption behavior in five possible scenarios, depending on customers’ constitution, transient reaction, brand loyalty, and competition intensity. Next, we propose dynamic contingent sourcing strategies to mitigate the supply disruption, and the optimal sourcing time is derived. Finally, by conducting numerical analysis, we obtain further managerial insights on how to adapt dynamic contingent sourcing strategies according to various contributing factors. [ABSTRACT FROM AUTHOR]

We consider a supply chain consisting of a supplier and a buyer. The buyer faces demand as a function of the selling price. There is risk of supply disruption, but the supplier can rebuild his capacity if he has invested for the capacity restoration before a disruption. To motivate the supplier to invest, the buyer can use one of two incentive contracts, namely direct and indirect. With a direct contract, the buyer provides a financial subsidy to share the supplier's capacity restoration cost when disruption occurs. With an indirect contract, the buyer adjusts the wholesale price in the case of disruption to stimulate the capacity restoration. Both contracts allow the buyer to adjust the order quantity in the case of disruption. We analyze decisions of each supply chain member under the two contracts with different commitment strategies (the ex ante commitment (EA) strategy under which the contract is signed before disruption and the ex post commitment (EP) strategy under which the contract is signed after disruption), and study how the supply disruption affects the buyer's selling price to end customers. We show that, from the perspective of either the supplier or the buyer, the incentive contract under the EA strategy is preferred by leading to a greater profit. Further, through numerical experiments, we recognize conditions for the fixed investment cost, probability of disruption, and regular wholesale price, under which each incentive contract encourages the supplier to invest for the capacity restoration, and brings greater profit to each supply chain member. [ABSTRACT FROM AUTHOR]

This paper addresses the comparison and selection decision of reactive strategies for supply disruption management. We consider an assemble-to-order supply chain with one manufacturer who employs a single-sourcing strategy for each kind of component. The manufacturer assembles products for customers using components purchased from the suppliers in a just-in-time environment. Demand for the products is time-sensitive. We propose and compare three pure reactive strategies and two dynamic reactive policies for managing supply disruption. In the pure reactive strategies, only one kind of strategy is adopted during the disruption. But strategies adopted in the dynamic pure reactive policies change with the passage of time during the disruption. In the dynamic mixed strategy with customer choices, the manufacturer can use both backup source to offer on-time delivery and compensation policy to compensate customers for waiting in each period during the disruption. We find that the backup sourcing strategy is preferred at the beginning of the supply disruption, while the compensation strategy is preferred as time elapses. The dynamic pure strategy is superior to any other pure reactive strategies. The dynamic mixed strategy with customer choices is superior to the pure backup sourcing strategy. The backup cost and customer sensitivity are two determining factors in the manufacturer's choice of the reactive strategies. [ABSTRACT FROM PUBLISHER]