Supply Contracts With Periodic, Stationary Commitment

The purpose of this paper is to model and analyze supply contracts with periodical commitment, in which the order quantities are fixed and stationary, with limited flexibility to change the order quantity at a cost to the buyer. A solution methodology is provided for the general, stochastic problem, and consideration is given to specific demand distributions. The deterministic model is also investigated, formulating the problem as a mixed‐integer linear program and as a network flow problem. Computational analyses are conducted, and the extension of the basic problem to the multiple‐product, multiple‐constraint problem is discussed.