Coordination of supply chain after demand disruptions when retailers compete

This paper investigates the coordination mechanism for a supply chain with one manufacturer and two competing retailers when the demands are disrupted. This differs from conventional supply chain coordination models under a static case. We will consider different scenarios of the problem: the production deviation cost may be either incurred to the manufacturer or to the retailers; the supply chain is to be coordinated by either a linear quantity discount schedule or an all-unit quantity discount schedule. In each case, we discuss how the supply chain is coordinated, and how it differs from the original planned scheme. We obtain some interesting managerial observations; for example, the discount slope is unchanged when the manufacturer bears the production deviation cost, but may change when the retailers bear the deviation cost. Some numerical examples are given to illustrate the theoretical results.