Article
Retailer’s Emergency Ordering Policy When Facing an
Impending Supply Disruption
Jingfu Huang , Gaoke Wu and Yiju Wang *
Citation: Huang, J.; Wu, G; Wang, Y
Retailer’s Emergency Ordering Policy
When Facing an Impending Supply
Disruption. Sustainability 2021, 13,
7041. https://doi.org/10.3390/
su13137041
Academic Editor: Paolo Renna
Received: 27 April 2021
Accepted: 18 June 2021
Published: 23 June 2021
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4.0/).
School of Management Science, Qufu Normal University, Rizhao 276826, China; jingfu_huang@126.com (J.H.);
wugaoke1@163.com (G.W.)
* Correspondence: wyijumail@163.com; Tel.:+86-135-6330-9372
Abstract:
Supply disruption is a common phenomenon in business activities. For the case where the
supply disruption is predictable, the retailer should make an emergency procurement beforehand to
decrease the inventory cost. For the scenario such that the happening time of the supply disruption
obeys a certain common probability distribution but the ending time of the supply disruption is
deterministic, based on minimizing the inventory cost and under two possible procurement strategies,
we establish an emergency procurement optimization model. By considering the model solution
in all cases, we establish a closed-form solution to the optimization model and provide an optimal
emergency procurement policy to the retailer. Some numerical experiments are made to test the
validity of the model and the effect of the involved parameters on the emergency procurement policy.
Keywords: supply disruption; emergency ordering policy; impending
1. Introduction
In the modern market, supply chain disruptions usually occur due to some unfore-
seen triggering events and jeopardize the flow of material and normal business activities
significantly [
1
–
8
]. Generally, the risk of supply chain disruption comes from five distinct
sections: demand, supply, regulatory, infrastructure, catastrophic [
9
]. Natural disruptive
triggers include earthquakes, floods, fires, and man-made triggers include terrorist attacks,
accidents, supplier bankruptcy, etc. [
10
]; well-documented disruption triggers include the
9/11 terrorist attacks, Hurricane Mitch, and the Taiwan earthquake in 1999. The resulting
consequences of a disruption are dramatic. For example, the Taiwan earthquake in 1999
caused global supply disruption of the computer chip, the Philips fire in 2000 struck a fatal
blow to Ericsson’s mobile phone business, and a series of events such as the 9/11 incident
in 2001 resulted in many industrial supply chain disruptions [11].
With the progress of globalization as well as outsourcing and an intensified focus on
efficiency and lean management, the risk of supply chain disruptions has increased over
the last decade [
12
], and the research of supply chain risk has attracted much attention
from researchers [6,13–21].
To reduce the risk of supply chain disruption, the strategy of building resiliency into
a supply chain is introduced in supply chain risk management. For this, Hendricks and
Singhal [
22
] offered some suggestions for risk mitigation including improving forecast
accuracy, synchronizing planning and execution, reducing lead times, collaboration with
partners, and investing in technology. Hopp, Iravani, and Liu [
23
] detailed a plan that
focuses on considering possible risks and how to prevent them, responding to disruptions
when they occur, formulating plans that protect the supply chain, focusing on the overall
supply chain structure, and planning for the process of recovering from possible disrup-
tions. For large-scale disruptive events, Akkerman and Van Wassenhove [
24
] proposed
a plan of sense making, decision making, implementation, and learning. Hendricks and
Singhal [
25
] suggested that focusing on reducing the frequency and working to better
predict disruptions will give businesses more time to resolve problems when they occur.
Sustainability 2021, 13, 7041. https://doi.org/10.3390/su13137041 https://www.mdpi.com/journal/sustainability
