Inventory Policies and Supply Chain Coordination under Logistics Route Disruption Risks

Abstract

Predictable logistics disruptions due to scheduled lockdowns for large-scale events such as the Olympic Games may not only reduce supply chain profits, but also increase carbon emissions. To help solve these problems, an emergency transit policy to be applied to the logistics path is an effective solution. However, optimal inventory control is needed. This paper proposes an optimization model to control ordering and inventory policies for decentralized and centralized supply chains. The model considers the logistics path damping coefficient, the logistics path acceleration coefficient, and the vehicle loading capacity ratio in emergency transit. Our major findings include the following. First, supply chain profits under centralization are confirmed to be higher than under decentralization. Second, a price discount mechanism can achieve supply chain coordination. Third, the manufacturers in a centralized supply chain are more inclined to choose a logistics path with a high acceleration coefficient in order to let their cargo arrive quickly and to reduce the impact of the lead time demand fluctuations. Finally, the implications of our research results for carbon emission reductions are discussed.