Contract pricing and coordinating model of supply chain on strategic material based on real option

Abstract

The purpose of this paper is to introduce real option theory into supply chain disruption management of strategic material, so as to improve the revenue of supply chain and solve the problems of large capital occupancy and inaccurate demand forecast. Based on real option theory, we model the supply chain of strategic material by some reasonable assumptions. Furthermore, the corresponding real option pricing model was built. Considering the features of strategic material management, the execution possibility of the pricing model is independent of price fluctuation. The numerical example which is demonstrated at last shows the performance improvement of purchasing with real option contract on supply chain revenue by comparing traditional direct purchasing method.