Next Article in Journal
Numerical Predictions of Early Stage Turbulence in Oscillatory Flow across Parallel-Plate Heat Exchangers of a Thermoacoustic System
Previous Article in Journal
Toward Defect Engineering Strategies to Optimize Energy and Electronic Materials
Article Menu
Issue 7 (July) cover image

Export Article

Open AccessArticle

Risk Analysis of a Two-Level Supply Chain Subject to Misplaced Inventory

Academy of Chinese Energy Strategy, China University of Petroleum-Beijing, 18 Fuxue Road, Changping, Beijing 102200, China
School of Industrial Management Engineering, Korea University, Anamdong 5-ga, Seongbuk-gu, 136-713 Seoul, Korea
Author to whom correspondence should be addressed.
Appl. Sci. 2017, 7(7), 676;
Received: 14 April 2017 / Revised: 21 June 2017 / Accepted: 28 June 2017 / Published: 30 June 2017
PDF [811 KB, uploaded 3 July 2017]


Misplaced inventory is prevalent in retail stores and may lead to the overall poor performance of the supply chain. We explore the impact of misplaced inventory on a two-level supply chain, which consists of a risk-neutral supplier and a risk-averse retailer. The supplier decides the wholesale price to maximize her profit, whereas the retailer decides the order quantity to maximize his utility. Under the Conditional Value-at-Risk (CVaR) criterion, we formulate the problem as a Stackelberg game model and obtain the equilibrium solutions in three cases: (i) information asymmetry about inventory errors exists; (ii) the retailer shares information about inventory errors with the supplier; and (iii) in order to reduce misplaced inventory, the supply chain deploys Radio-Frequency Identification (RFID) technology. The benefits of information sharing and RFID implementation are explored. A revenue and cost sharing contract is proposed to coordinate the supply chain and to allocate the cost savings from RFID implementation among supply chain participants. Finally, we provide managerial insights for risk-averse decision makers that are considering investing in the RFID technology. View Full-Text
Keywords: misplaced inventory; risk aversion; RFID; CVaR; supply chain coordination misplaced inventory; risk aversion; RFID; CVaR; supply chain coordination

Figure 1

This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).

Share & Cite This Article

MDPI and ACS Style

Zhu, L.; Lee, C. Risk Analysis of a Two-Level Supply Chain Subject to Misplaced Inventory. Appl. Sci. 2017, 7, 676.

Show more citation formats Show less citations formats

Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Related Articles

Article Metrics

Article Access Statistics



[Return to top]
Appl. Sci. EISSN 2076-3417 Published by MDPI AG, Basel, Switzerland RSS E-Mail Table of Contents Alert
Back to Top