Pricing and lot sizing in a two level supply chain with supplier process breakdown and random repairing time

In this paper, we study the joint pricing and lot sizing problems for a two level supply chain under supplier production breakdown and random repairing time. The supplier and the retailer follow a Stackelberg gaming approach, in which the supplier is the leader and the retailer is the follower. For the supplier, two production strategies, i.e., the flexible strategy (Strategy F) and the inflexible strategy (Strategy IF), are studied. When utilizing strategy F, the supplier sets a planned production time and an additional reserve time. When utilizing strategy IF, the supplier only sets a planned production time. Comparing the two strategies, we find that by utilizing the flexible strategy, both parties in the supply chain can be better off. By conducting a numerical test, some other managerial implications are found, which are also presented in the paper.