A Capacity Reservation Contract Model for a Multiple Supplier Environment

Abstract

It is a common practice in many industries to use a replenishment contract with a mechanism of capacity reservation. In this paper, we focus on a multiperiod capacity reservation contract practiced between a buyer who buys a single type of product and sell it to end customers and two or more heterogeneous suppliers who produce and replenish the product as agreed upon by a contract. A mathematical model is developed for a single supplier situation from the buyer"s perspective. It is then extended to a multiple supplier model for a system. A rolling-horizon implementation strategy is suggested for the efficient application of the models.