As global public health events and regional conflicts have greater influence on supply chains nowadays, supplier default in procurement becomes more and more common in practice. However, there is less research on portfolio procurement purchasing decisions in the case of fixed-term contract supplier default. This paper focuses on the optimal purchasing decision of buyers by using a combination of fixed-term contracts and spot transactions, which is a beneficial extension of the classical newsvendor model. When supplier default is not considered, the optimal purchase quantity in the fixed-term contract is first obtained, which maximizes the buyer’s expected profits. Research shows that supplier default has an important impact on the optimal purchasing decision making in portfolio procurement. The optimal purchase quantity of the buyer in the fixed-term contract decreases with the increase in the default rate of the contract supplier, which implies that the default from the contract supplier inhibits a larger purchase quantity in the fixed-term contract. In addition, it is proved that the buyer’s expected profits from portfolio procurement increases with the decrease in the contract supplier’s default rate. Finally, numerical experiments and sensitivity analysis are conducted to prove the result, and some management opinions on the optimal decision-making in portfolio procurement with fixed-term contracts and spot transactions are put forward.

This paper studies the optimal order decisions for the loss-averse newsvendor problem with backordering and contributes to the risk hedging issue in the newsvendor model. The Conditional Value-at-Risk (CVaR) measure is applied to quantify the potential risks for the loss-averse newsvendor in a backordering setting, and we obtain the optimal order quantity for a loss-averse newsvendor to maximize the CVaR of utility. It is found that the optimal order quantity to maximize the CVaR objective could be bigger or smaller than the expected profit maximization (EPM) order quantity, which provides an alternative explanation on decision bias in the newsvendor model. This study also reveals that the optimal order quantity for a loss-averse newsvendor to maximize expected utility with backordering is smaller than the EPM order quantity, which implies that backordering encourages the loss-averse newsvendor to order fewer items. Sensitivity analyses are performed to investigate the properties of the optimal order quantities and managerial insights are suggested. This paper provides a novel method for the risk management of the loss-averse newsvendor model and presents several new ordering policies for the retailers in practice.

This paper studies a newsvendor’s optimal ordering decisions in portfolio procurement from long-term contracts and spot purchases. In portfolio procurement, the newsvendor can order commodities in a long-term contract to meet market demand, and the excess demands can be supplemented from the spot market. Firstly, the newsvendor’s optimal ordering quantity in long-term contracts to maximize the expected profits is achieved when the spot price fluctuation is not considered. Furthermore, the newsvendor’s optimal ordering quantity is derived when the spot price fluctuation is considered. The research will show that the newsvendor’s optimal ordering decisions change with market parameters. Spot price fluctuation has a significant influence on optimal ordering decisions in portfolio procurement. This research uses the method of relative fluctuation of spot price and long-term contract price, which is more applicable in practice. It is shown that the newsvendor’s optimal ordering quantity in a long-term contract increases with the spot price fluctuation, which implies that price fluctuation in the spot market leads to a greater order quantities in long-term contracts. Moreover, it is proven that the newsvendor’s expected profit obtained from portfolio procurement decreases with increasing spot price fluctuation. Finally, this is verified by numerical experiments, and several management insights are suggested.